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Business and Economy

Governor Analyzing AG’s Latest ‘Nexus’ Opinion

Gov. Bill Haslam said Tuesday it was too early for him to say what the ramifications of Attorney General Robert Cooper’s latest opinion related to Amazon.com might mean for the state.

Cooper issued an opinion dated Oct. 3 that said, as a general rule, the state cannot waive a taxpayer’s obligation to collect sales taxes and that the fact sales are made electronically does not change a retailer’s liability for collecting and remitting the tax.

But the opinion also states that the Commissioner of Revenue has “substantial discretion” in determining the best measures to enforce the state’s tax laws.

Haslam told reporters Tuesday after making a speech in Nashville that he had just heard about the opinion and had little to comment on, but he said it is possible it could mean there might have to be legislative action regarding a state agreement with Amazon.

“That could be one of the outcomes, that we’d have to have some legislation passed to set up whatever the new arrangement ends up being,” Haslam said.

The Haslam administration has been involved in talks with Amazon for a long-term understanding of where Amazon stands on having to collect the state’s sales tax. The administration of Gov. Phil Bredesen agreed to allow Amazon to build two distribution centers in the state without collecting sales taxes, in exchange for their bringing hundreds of jobs to the state.

Haslam said any long-term agreement his administration were to make with Amazon would include as part of the deal that the state can publicly say what is in the agreement.

“It has become such a big deal, I think it’s important that when we do come to an agreement we be able to talk about it,” Haslam said. “So that would be part of the agreement we make with Amazon.”

Commissioner of Revenue Richard Roberts has said he cannot publicly discuss any arrangement with Amazon — or even if a deal exists with Amazon — because of privacy elements of the law.

Haslam’s comments Tuesday indicate that the public interest would be so high that his administration would feel compelled to make it part of the deal that the agreement be public. Lack of transparency has been one of the primary points of contention about the Bredesen deal with the Internet retail company.

Haslam did not address Amazon in his speech to the First Tuesday lunch group of Republicans. But he covered several other issues, including the fact he believes the outcome of the state’s request for a waiver from the federal government on the No Child Left Behind law will probably not be known until late November or early December.

He was asked why it would take so long for a decision.

“I actually don’t know the answer to that. I was initially hopeful, quite frankly, when we went up there, we’d hear an answer by late October, early November,” Haslam told reporters after his speech. “I understand now it’s about 30 days past that. I don’t really know that. I wish I did.”

Haslam also addressed the affirmation of the state’s bond ratings. After a recent trip by state officials to New York to state Tennessee’s case for strong fiscal management, the major rating agencies announced this week that Tennessee maintains its current ratings.

The state keeps its AAA rating from Moody’s Investor Service and Fitch, and it retains its AA+ rating from Standard & Poor’s. Standard & Poor’s gave the state a positive outlook, but Moody’s put the state on “negative outlook,” which is believed to be tied to concerns about the effect on states by the overall national economy.

The attorney general’s opinion that could affect Amazon appears to say that a retailer cannot dodge tax collection simply because its transactions are online.

In the analysis of the issue, the attorney general says:

“In cases where nexus (physical presence) does exist, the retailer is liable for collecting and remitting Tennessee sales taxes regardless of the method by which the retailer accepts orders for goods sold to Tennessee customers. If the retailer’s in-state activities are sufficient to establish nexus, the fact that orders are placed by electronic means, such as by telephone or the Internet, does not affect the retailer’s state sales tax obligations.”

The opinion says if a distribution house is owned by a retailer’s subsidiary that nexus exists only if the subsidiary’s activity is “significantly associated” with maintaining a market in the state.

The attorney general’s analysis further states:

“We refer you to recent Attorney General Opinion No. 11-55, in which this Office stated that, where legislation unambiguously imposes state sales tax obligations relative to specific transactions, the State of Tennessee cannot contractually waive a taxpayer’s obligation to pay the tax. … In reiterating this principle, however … we note the Commissioner of Revenue must necessarily possess considerable discretion in determining the appropriate measures to take to administer and enforce Tennessee’s tax laws.”

“…The Commissioner’s exercise of discretion is particularly appropriate when the enforcement of a tax may be debatable and must be balanced and coordinated with the Commissioner’s other duties and priorities in administering all of the taxes entrusted to him.”

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Press Releases

AMSF: Claims Amazon.com Deserves Special Treatment ‘Intellectually Insulting’

Press Release from The Alliance for Main Street Fairness in Tennessee; Oct. 4, 2011: 

Tennessee Attorney General States Amazon Has Nexus; If Internet Retailer Can Collect In Golden State, It Can Collect In Volunteer State? 

Nashville, TN – The Alliance for Main Street Fairness (AMSF) in Tennessee today issued the following statement in response to an opinion issued by the state’s attorney general demonstrating under current law Amazon.com clearly has nexus or a physical presence in Tennessee and therefore must abide by the law just as retailers in the state do every single day. This opinion follows news from California where Amazon has conceded it can and will collect sales taxes.

“As more facts and information are made public, it is becoming increasingly clear that Amazon.com’s argument against sales tax collection is evaporating. A recent opinion by Tennessee’s attorney general proves that under the law as written Amazon has a physical presence in the state and should be collecting sales taxes when its distribution centers open,” said Mike Cohen, spokesperson for the Alliance for Main Street Fairness (AMSF) in Tennessee. “Amazon first stated they couldn’t collect sales taxes, then stated it was unconstitutional, and now, in California, they have conceded they can, should and will collect. Amazon is building the same distribution centers in California that they are in Tennessee, and they should play by the same rules in our state. Any claim by Amazon that they merit a special deal in Tennessee is intellectually insulting and just plain wrong. Amazon must follow the law and collect sales taxes just like every other retailer in the state.”

To view the attorney general’s opinion, click here.

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Featured

Kisber Doesn’t Recall if Amazon Deal was in Writing

Former Tennessee Economic and Community Development Commissioner Matt Kisber said Saturday night he does not remember if the controversial Amazon.com tax arrangement with the state was ever put in writing.

The question of whether the Amazon deal was actually put on paper or was the result of a handshake deal has been one of many questions surrounding the agreement, which was made during former Gov. Phil Bredesen’s administration, in which Kisber served.

The Tennessee Department of Revenue commissioner at the time, Charles Trost, has previously refused to comment on specifics of the Amazon arrangement, as has Bredesen.

Amazon struck a deal with Tennessee in the waning weeks of Bredesen’s second term, where the Internet sales giant would build two distribution plants in the state and not have to collect sales taxes on its transactions — as opposed to the collection of the sales tax by the many bricks-and-mortar retailers in the state.

Some lawmakers, including chairs of both the House and Senate finance committees, have criticized the deal with Amazon, saying it gives Amazon an unfair competitive advantage.

Amazon has committed to building two distribution centers in southeast Tennessee, one each in Bradley and Hamilton counties, where the company agreed to provide more than 1,000 jobs. The Bredesen team made the deal under the presumption that if it did not offer the incentive on tax collections, Amazon might take its distribution centers — and the jobs that go with them — to another state, like Georgia. Amazon, it was recently reported, has offered 1,500 people jobs at the Bradley and Hamilton centers.

Amazon recently announced a third Tennessee distribution center, in Lebanon in Wilson County.

The issue of transparency on letter rulings — written statements on tax issues for specific taxpayers — from the Department of Revenue has risen during the Amazon debate. When lawmakers considered the Amazon deal during the legislative session this year, one of their questions was whether Amazon’s agreement was ever formally put on paper.

When asked Saturday night at the Tennessee Democratic Party’s Jackson Day Dinner in Nashville if the Amazon agreement was in writing, Kisber gave a long pause.

“I don’t actually remember,” he said, then taking another pause. “I really don’t. I don’t know if we got an MOU (memorandum of understanding). That’s so far back now, in terms of what I’ve been dealing with, I don’t … I don’t honestly remember. I would have to defer to the current administration.

“I remember the discussions. I remember everything we discussed, but I don’t remember if it got … if there was a written agreement or not.”

Kisber and former Revenue Commissioner Reagan Farr have launched Silicon Ranch Corporation, a solar power development business, since leaving office. Bredesen is chairman of the operation.

Richard Roberts, current revenue commissioner under Gov. Bill Haslam, has refused to comment on Amazon’s deal, citing policies that prevent him from discussing agreements with private taxpayers.

Kisber said the project was in the works for many months and that there were multiple discussions involved in the deal. He recalled people on the site selection team, both on the consultant side and the company side, in the dealings with Amazon.

Haslam has announced his administration is talking to Amazon about a long-term arrangement in which Amazon would, in fact, collect the sales taxes, a development that has extended the debate over the issue and led to renewed discussion about the Bredesen deal. Haslam has said there would be openness on the long-term arrangement if and when one is completed.

Haslam had been elected, but not sworn in, when Bredesen informed him of his plans with Amazon. Haslam said he would agree to honor Bredesen’s commitment.

Kisber said the issue, as it was explained to him, involved third-party handling of the products being sold.

“I was told we were not talking about Amazon books and CDs. We were talking about companies for whom Amazon provides fulfillment services through their Internet platform,” Kisber said. “There are hundreds of companies that you buy from if you use Amazon that is not being sold by Amazon but is being fulfilled (by Amazon).

“And Tennessee has other companies that provide that type of service as well. This was consistent in my thinking with the services of those types of companies.”

Kisber complimented Haslam’s handling of the issue.

“Whenever an economic development project becomes political theater, it impacts the state’s reputation for business,” Kisber said. “And I commend Governor Haslam for working to resolve the issue and tone down the rhetoric so Tennessee can focus on its wonderful business climate and using that to attract projects to the state.”

Kisber attributed his inability to recall specific details on the Amazon deal to the passage of time since he worked for the State of Tennessee.

“I will be honest with you. I loved state government, and January 15 I left it. I have been focused on my business endeavors. Doing a start-up business is challenging enough,” Kisber said. “So I have been available if the current administration has any questions. But I have left that phase of my career.”

Kisber said he remembers Bredesen, Trost and Comptroller (Justin) Wilson being involved in the Amazon matter.

“As was the case on all projects, I was the lead for the state,” Kisber said.

He said there was unanimous concurrence on the rationale for the deal.

“I think most everyone involved was in complete agreement,” Kisber said. “We could get the jobs and not have the collections, or you could not get the jobs and not have the collections. The issue was one that was going to be resolved, in Governor Bredesen’s opinion and mine, that it was going to take a national solution.”

The concept of a national solution involves Congress acting in a way that would make the sales tax policies uniform among the states.

Kisber had been involved in the streamlined sales tax project that would bring all states in line under one agreement, going back to his days as a state legislator.

“I have been intimately involved and familiar with this issue from the very beginning,” he said. “And while we were advocating at that time, as a legislator, a common state solution, we all said the best solution would be a national solution, and I still believe the best solution is a national solution.”

There has been broad skepticism, however, that Congress would involve itself in the issue. A common belief is that forcing online retailers to collect sales taxes would make Congress appear to be advocating a new tax, even though such an act would only guarantee the collection of existing taxes. Others have argued that the issue would become so compelling for states collecting revenue that Congress would be forced to take action on their behalf.

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Business and Economy Liberty and Justice Tax and Budget Transparency and Elections

Retailers’ Group: $3 Billion At Stake in Online Sales Tax Issue

A brick-and-mortar retailers’ group has warned that the state could lose out on $3 billion in revenue and more than 10,000 jobs over the next five years if online retailers continue not to collect sales taxes.

The projections are in an study commissioned by the Alliance for Main Street Fairness, a national organization made up of retailers ranging from small businesses to Wal-Mart.

“From the Alliance point of view, this really tells us the Amazon deal is a bad deal for Tennessee. It’s going to cost us more jobs than it’s going to gain,” said Mike Cohen, the organization spokesman, said during a press conference at Cumberland Transit bike shop in Nashville.

The Alliance opposes a deal the Bredesen administration struck with online retailer Amazon.com, which promised to build distribution centers in Hamilton and Bradley counties under an agreement the company would not have to collect sales taxes.

Gov. Bill Haslam has said the state should honor the deal, but that he wants Amazon to collect sales taxes on its transactions in Tennessee in the future, and his administration is currently negotiating with Amazon to find a long-term solution. As of last week, Haslam said he had nothing new to report.

The Legislature is generally split about what the state should do. Sen. Jim Kyle, the top ranking Senate Democrat, is too.

“It will take the local business community to drive that Amazon issue,” Kyle said during a stop outside the University of Memphis during the Democratic Jobs Tour Monday. “There are two sides to it. One is keeping your word and the other is, doing what’s the right thing to do. The unfortunate thing here is when you’re keeping your word, you’re not doing the right thing.”

The Alliance’s study leaned heavily on a report out of the University of Tennessee, which found the state would miss out on collecting as much as $456.1 million in local and state sales taxes next year on online purchases. Taxpayers last year paid more than $8 billion in state and local sales taxes, according to documents from the Department of Revenue.

Younger Associates, which performed the analysis for the Alliance, asserts there is a direct relationship between state and local government spending and the number of jobs supported. If retailers like Amazon.com are not forced to collect sales taxes, about 6,900 jobs would be lost next year, leading to a loss in wages and decreases in consumer spending to purchase other taxed items such as gas, cars, alcohol, tobacco and amusement.

The study says that would translate to additional lost sales tax collections — in total, $480.7 million in 2012, followed by a loss of $3.02 billion in taxes and 10,567 jobs in five years.

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Business and Economy Featured NewsTracker Tax and Budget

Durbin Pushing for ‘National Standard’ on Internet Sales Tax Collections

As state government officials here wrestle with requiring Amazon.com to collect sales taxes from Tennessee consumers on their Internet purchases, one of the country’s top congressional Democrats told reporters in Nashville Monday he’s pushing for a national cure.

But he’s anything but certain how long it will take to pass his “Main Street Fairness Act.”

“(Congressman Jim Cooper) and I would be loath to suggest we do anything quickly in Washington,” said U.S. Sen. Dick Durbin, an Illinois Democrat and assistant majority leader in the Senate. “But I think it is within the realm of possibility if we get the right bill and vehicle moving.”

Gov. Bill Haslam is looking to Washington officials to settle the ongoing disputes between states and online retailers like Amazon to standardize the collection of sales taxes. A month prior to his inauguration, then Gov. Phil Bredesen cut a deal with Amazon allowing it to open up distribution centers around the state without having to collect the taxes.

Although Haslam agreed, he says his administration is in the process of negotiating a long-term solution that would honor the former governor’s agreement while still opening up the possibility that the state can eventually collect sales taxes from the Internet retail giant. So far, details of those talks have been kept secret.

“You won’t be surprised to know that most Americans don’t pay the state or local sales tax on their Internet purchases,” said Durbin, who held a press conference with Cooper at the Loews Vanderbilt Hotel. “If it looks like you’re somehow imposing a new tax, you can imagine what happens in Washington. There will be groups that are marching in the streets against it.”

He said his plan would create a national standard to require large Internet retailers to collect state and local sales taxes and exempt small Internet sellers. Durbin says Amazon supports his proposal.

“This is not a new tax,” said Cooper. “This is a collection of an existing tax and everybody should be for that.”

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Featured NewsTracker

Haslamazon

Amazon.com accounts for only 5 percent of e-commerce in the United States, but it is dominating discussion of sales tax issues in Tennessee, as Gov. Bill Haslam can attest.

Haslam was bombarded by questions from reporters about Amazon at at least three separate press availabilities Thursday — although there had been little new development in the Amazon issue.

And Haslam’s reply has not changed: The state will honor the commitment given Amazon by the Phil Bredesen administration, but negotiations are ongoing to nail down the state’s long-term plans with the online retailer, which currently does not collect sales taxes owed the state.

But after awhile, it got a bit comical Thursday.

After fielding numerous Amazon questions at an event in Sumner County, a television reporter at a second event down the road asked Haslam for the latest word on “Yahoo.”

“You mean Amazon,” Haslam interjected with a smile.

When a reporter in yet another session with Haslam asked about Amazon, the governor laughed, then gave another standard answer.

The impetus for the Amazon questions might have been a press conference held Thursday in Lebanon, where retailers complained about a perceived advantage for Amazon against brick-and-mortar stores. Or it might have been the media attention to Amazon the day before in Chattanooga, where Haslam spoke at a Chamber of Commerce meeting. The Chattanooga area has two Amazon distribution centers in the works.

After an economic development meeting at the Bluegrass Country Club on Thursday, most of the Capitol Hill press corps was there, and the questioning began:

Q: “I’m a little confused about the Amazon thing. Are you honoring the deal? Are you negotiating a different deal? What’s going on?”

Haslam: “First of all, we’ve been real clear. Of course we are honoring the deal. Second, I said way back in the legislative session that we would have ongoing discussions, we’d have further discussions. We’re doing that. There’s really nothing else to say beyond that.”

Q: “In terms of these further discussions, did the whole situation with what happened in South Carolina, where there was suddenly a four-year or five-year limit, did that put pressure on you all to take a look at this?”

Haslam: “I wouldn’t say it put pressure on us. I’d say Amazon is looking to grow. We welcome those jobs there in Hamilton and Bradley (counties). We’d love to see more jobs. Again, we’d like to come up with something that long-term works for them and us. And we think we can do that. We’re in the middle of discussions.”

Q: Right now in Lebanon, A.J. McCall and a bunch of people are having a press conference basically saying it’s not fair. You’re continuing to hear about this.”

Haslam: “Listen, if this was an easy situation, you know, it would be easy to solve. But the truth is there’s really good arguments on both sides. Retailers large and small are saying, ‘We’re collecting sales tax.’ By the way, everybody owes sales tax. Let’s be real clear on that. Everybody owes it. They’re saying, ‘We’re collecting it. Everybody should.’ That’s a fair argument. The deal was done by the state of Tennessee. They said if they built somewhere else, we still wouldn’t be collecting the sales tax. And that’s a good argument, too. We think we can work out a solution that works long-term for both.”

After a question about incentives on an Electrolux plant in Memphis, Haslam said deals should give a good return on investment for taxpayers, saying, “We’re not going to get out of the incentive business.”

Haslam was asked again about Amazon.

Q: “You had said you agreed with Bredesen.”

Haslam: “He called me in between election and going into office and said, ‘We’re getting ready to do this. They don’t want to do that unless they know you will honor what we did.’ I said, ‘We’ll do that.'”

Q: “How do you figure out what’s a good return on investment?”

Haslam: “It’s a combination of a couple of things. It’s the dollars they invest. It’s the number of jobs. It’s the average wage of those jobs. And then there are some other factors. Right now, rural areas are struggling. You might look at doing something if you have a rural county with 18 percent unemployment.”

Just minutes later, at another event, Haslam got the “Yahoo” question.

After correcting the questioner, Haslam: “We obviously are thrilled to have the jobs that Amazon brings to Tennessee. We’re in the middle of ongoing discussions with them to have a long-term solution we think works for everybody, and hopefully we’ll have more to say about that down the road.”

Q: “Do you think it will hurt the smaller businesses?”

Haslam: “Nothing has changed. Right now, if you’re buying from Amazon, or last year, or the year before that, you weren’t paying the sales tax. Nothing has changed on that. They’re building a distribution center, which some people think they have a physical presence in the state that should require them to collect sales tax that they didn’t collect before. So really nothing has changed. Before, they weren’t collecting sales tax, and they don’t now. We welcome the jobs and hope that down the road there’s a solution to this.”

Q: “Where does the deal stand now?”

Haslam: “We’re in the middle of discussions with them, and it’s too preliminary to say when those will be wrapped up.”

Later at that same event, Haslam was asked about Amazon.

Q: “On Amazon…”

Haslam laughed.

Q: “If Governor Bredesen’s deal is final and you’re standing by that, then why is it you’re still talking with Amazon?”

Haslam: “No, what I said with Amazon is we’re going to honor the commitment that was made to them. They’re looking to grow. We’re looking to make certain we have an advantage that’s win-win for us long-term, and again, we’re having conversations that I think are in a good place now, but we’ll have to see how that works out.”

Q: “Do lawmakers have a role in this?”

Haslam: “I think the legislature has a role, for sure. I think one of the things we’re trying to do in our economic development deals is to make certain that everybody knows ‘Here’s what we did, and here’s why we did it.’ You can’t have a legislature out there negotiating deals. That doesn’t make sense to have 133 people, plus the governor, negotiating. I think it’s fair for them to look at deals and understand that and say, ‘That’s where we want the state to go.'”

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Press Releases

Prominent TN Furniture Retailer says Amazon Tax Deal Bad for Homegrown Business

Press Release from the Alliance for Main Street Fairness, Aug 25, 2011:

One Of Tennessee’s Oldest Businesses Calls For Change At State & Federal Level

Lebanon, TN – The owners of one of Tennessee’s oldest businesses said today that the deal the state struck to get Amazon.com to locate distribution centers in the state is wrong and bad for local employers. DT McCall & Sons, which sells furniture, electronics, appliances, guns and more, operates stores in Carthage, Cookeville, Lafayette and Lebanon. They also sell products online and collect the sales tax.

Lebanon is one of the Tennessee locations where Amazon will be opening a distribution center. Under the deal brokered by then-Governor Phil Bredesen, Amazon doesn’t have to collect and remit sales taxes in the Volunteer State. DT McCall & Sons wants both state and Federal action to fix the inequities in collecting state sales taxes so Tennessee employers are not operating at a competitive disadvantage.

“Our company welcomes Amazon and their investment to Tennessee; however, you’d like to think that after 115 years of paying and collecting state taxes and employing Tennesseans, the state wouldn’t cut a deal to give your competition an unfair price advantage,” said AJ McCall, one of the owners of DT McCall & Sons. “But that is exactly what they’ve done. They’ve used their power to put my company at risk and even helped locate them in the same town.”

Current Governor Bill Haslam has said publicly that Congress needs to pass a bill setting national policy concerning the issue so every state handles online sales taxes collection in the same manner. A study by the University of Tennessee concluded the state is losing $400 million dollars a year from uncollected sales taxes over the Internet.

McCall went on to say, “This is actually one of those cases where Congress can do something to help employers. I just hope they act soon, before more local businesses layoff employees or close up shop altogether. Those losses will grow because for every job Amazon creates, I believe we will lose two jobs at existing businesses. This deal is a lose-lose for every retailer in the state.”

McCall’s is far from alone in their view. The Alliance for Main Street Fairness (AMSF) represents Main Street business in all parts of the state that have banded together to oppose Amazon getting a government-sanctioned advantage. AMSF is also calling for a national solution that allows states to ensure all businesses operating within their borders are able collect and remit sales taxes.

“The state should be doing everything it can to help all businesses prosper,” said Mike Cohen, spokesperson for the Alliance for Main Street Fairness (AMSF) in Tennessee. “The government shouldn’t be picking winners and losers by forcing local businesses to collect the sales tax, while allowing out-of-state companies to avoid doing so. Both the state and Federal government should do the right thing by creating a level playing field level that lets all businesses compete fairly.”

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Business and Economy Featured Tax and Budget Transparency and Elections

McNally Pleased with Haslam’s Handling of Amazon Sales Tax Issues

Sen. Randy McNally, R-Oak Ridge, who has worked to require Amazon.com to collect sales taxes on its online sales, said Monday he endorses Gov. Bill Haslam’s efforts to resolve the issue, calling it a potential “win-win” solution for the state.

McNally also said he appreciates efforts in the Haslam administration to set new guidelines on the handling of private letter rulings — or written agreements specific to the taxpayer — which might make the process more transparent yet still protect a taxpayer’s confidentiality.

McNally, chairman of the Senate Finance Ways and Means Committee, noted new clout among members of the Legislature from the Chattanooga area, where two of the three distribution centers in the state announced by Amazon will be located. A third center has been announced for Lebanon in Wilson County.

Haslam says his administration is in negotiations with representatives of Amazon on establishing a long-term relationship on sales tax collections. The governor’s efforts come in the wake of an agreement between his predecessor, Phil Bredesen, and Amazon, where the company was granted permission to operate its facilities in the state without collecting sales taxes. The reason given for the deal was that the creation of hundreds of jobs in Tennessee made up for the tax issue and that without the deal Amazon would go to another state.

Haslam said last week he wants an agreement with Amazon where the company can expand in Tennessee and at the same time come with an understanding on the collection of taxes. Haslam said if such an agreement were reached the public would be able to know about the deal. Much of the arrangement under the Bredesen administration has been secretive.

“To the extent they can work something out that allows them (Amazon) to operate facilities and provide the jobs and then would, in the end, have them collecting and remitting sales tax, that’s a win-win,” McNally said. “I’m pleased with what the governor has said.”

Commissioner of Revenue Richard Roberts said last week he cannot comment on talks with Amazon, even to confirm or deny that negotiations are occurring.

“He can’t really discuss it unless Amazon gives him permission to,” McNally said.

But Haslam has spoken openly about the discussions, expressing his personal desire that Amazon collect the tax. Haslam publicly voiced his support for the original agreement, as have many lawmakers, citing the importance of the state protecting its reputation for keeping its word.

“Whether the governor, in talking to Amazon, says, ‘This is going to be on the record, and our discussions are not protected by confidentiality,’ I don’t know,” McNally said. “There is a statutory provision that protects taxpayer confidentiality for the Department of Revenue officials.”

McNally said his understanding is that the Department of Revenue is working with Sen. Bo Watson, R-Hixson, speaker pro tem of the Senate, and others about how to handle private letter rulings that are key to the confidentiality matter.

An effort to reach Watson on Monday was unsuccessful.

McNally said he believes such an agreement at the department could be possible while still providing some protection to the taxpayer — “whether that’s through redaction, or whether it’s through having the confidentiality provision expire after a certain length of time, or whether that’s through a mechanism where the commissioner of Revenue would say he’s issuing the ruling regarding ‘XYZ’ provision of the revenue rules, and his ruling is such-and-such without mentioning the taxpayer.”

McNally said such an effort at the Department of Revenue is a positive change. He also expressed confidence that a new long-term deal would be spelled out publicly, as Haslam assured.

McNally at one time suggested a two-year “grace period” for requiring Amazon to collect sales tax, but Haslam responded that it would leave uncertainty on the issue.

One of the developments in the Amazon issue has been the recent emergence of power among some lawmakers from the Chattanooga area. Amazon has announced distribution centers in Hamilton County and Bradley County in the southeast corner of the state.

Watson was recently named speaker pro tem in the Senate after Sen. Jamie Woodson, R-Knoxville, who had had the role, announced her departure to take a job as head of the State Collaborative on Reforming Education. Rep. Gerald McCormick, R-Chattanooga, was elected House majority leader this year, and Rep. Eric Watson, R-Cleveland, is chairman of the House Judiciary Committee.

“I know there are some very strong advocates, certainly very powerful individuals in that area,” McNally said. “They’ve got some real power in Chattanooga that it hasn’t had in a number of years.

“At the same time, they’re reasonable individuals. They realize you’ve got jobs and capital investment on one side of the ledger sheet, and you’ve got potential erosion of the sales tax base on the other. So, all of our conversations have been cordial, but they’re very strong advocates of their position.”

McNally and Rep. Charles Sargent, R-Franklin, chairman of the House Finance Ways and Means Committee, sponsored legislation this year seeking a requirement that Amazon collect the tax. They postponed it.

On Aug. 1, McNally and Sargent requested an opinion from Attorney General Robert Cooper on whether the state may waive the obligation of an out-of-state retailer to collect the sales tax. That followed an earlier request for an opinion from Cooper on whether Amazon had established sufficient retail presence — a legal threshold called nexus — to warrant collection of the tax and whether their legislation requiring it was constitutional. Cooper opined that sufficient nexus was present to warrant the tax collection and that the legislation was constitutionally defensible.

McNally was asked Monday his current opinion on the prospects for his legislation being passed.

“I’d say it’s an uphill battle,” he said.

But he sounded upbeat about Haslam’s recent approach.

“I appreciate the governor trying to work toward an equitable solution for the state, for that region, as far as jobs and capital investment,” he said.

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Business and Economy Tax and Budget Transparency and Elections

Haslam Promises Openness On Amazon

Gov. Bill Haslam insisted Friday he has not changed his position on negotiations with Amazon.com on the collection of sales taxes and said whatever agreement might be struck with the retail giant the people of Tennessee would be informed about it.

Meanwhile, former Commissioner of Revenue Charles Trost, on whose watch the original Amazon deal was made in Tennessee, declined to comment Friday on details of the state’s current arrangement with the company. Current commissioner Richard Roberts, whom Haslam said is leading the talks for his administration, declined to comment on any talks as well.

Haslam says he wants Amazon to collect sales taxes on its transactions in Tennessee in the future, and his administration is involved in talks with Amazon on how to settle the issue of whether the company should have to collect the tax.

But Haslam’s predecessor, Phil Bredesen, struck a deal last year before leaving office where Amazon would not have to collect sales taxes as the company established large distribution centers in Hamilton and Bradley counties, bringing more than 1,000 jobs to the state. Amazon has since announced the addition of a distribution center in Lebanon

Haslam has said he planned to honor the Bredesen agreement, which was handled with little transparency and has stirred interest among some legislators concerned about the erosion of the state’s sales tax base. Legislators from the Chattanooga area, home of the first two distribution centers, have generally supported the Bredesen deal because of the jobs it creates.

Negotiations between the Haslam administration and Amazon have raised questions on exactly what the arrangement might become and whether it represents a shift in the state’s policy.

“Nothing has changed from the state’s commitment at all,” Haslam said Friday. “We are in ongoing discussions with Amazon. Everybody knows that. We’d love to see them grow more. Number two, there is quite a bit of discussion in the Legislature about exactly how that should work out.

“I wouldn’t be being honest if I didn’t say I’d love for them (Amazon) to collect sales tax.”

The governor has said all along he would like to get the definition of the state’s long-term relationship with Amazon nailed down. He has also said there needs to be a national solution to the issue of online retailers collecting sales taxes, and Amazon officials have said they believe a national approach is best.

But given the continuation of talks with Amazon, the future of the state’s arrangement continues to be scrutinized.

Trost, a Nashville attorney who replaced Reagan Farr as commissioner of Revenue last Sept. 10, would not comment on details of the Bredesen deal.

“I really am not in a position where I can,” Trost said. “The taxpayer confidentiality rules have put me in a position where I just don’t even want to start down the road talking about it.”

Trost said he is not even in a position to confirm that the deal was struck while he was commissioner.

“What’s in the public record out there, if you looked at the timing on it, when I was in office, you can draw your own conclusions,” Trost said.

“It’s just not a topic I feel comfortable talking about to the press or anybody else. It’s just … I’ve thought about this … I’m no longer the commissioner. There is a new administration. There is a new commissioner. The issue is still in the public domain for discussion. I think my best policy is not to add myself to the discussion.”

The Amazon arrangement was made late in Bredesen’s time in office. Bredesen informed the incoming governor, Haslam, of the deal with the explanation that if Amazon were not given the break on tax collections, the company might have put its facility in Georgia.

“I have the utmost regard for Governor Haslam, Governor Bredesen, my successor as commissioner and my predecessor as commissioner,” Trost said. “There’s a new group dealing with these issues, and I’m just not going to get into it. That’s the only position I can take.”

Roberts had a similar response.

“I can tell you that the state statutes prohibit me from discussing any taxpayer, whether it be you or Billy Bob’s Bait Shop or an unnamed major Internet retailer,” Roberts said. “Just as a matter of policy we simply can’t comment on individual taxpayers.”

Roberts said he cannot confirm that the administration is talking to Amazon.

“Our policy here requires that we maintain confidentiality. The reason is we have to give any taxpayer the confidence that what they file with us and their dealings with us will not wind up in the public domain. Until the legislature changes that — and I also believe it’s the right policy — I just simply can’t confirm or deny,” Roberts said.

Sen. Andy Berke, D-Chattanooga, speaking to reporters Friday, picked up on the issue of discussing the talks.

“I can’t quite tell what the governor’s position on this is, but we are making a mistake by talking about our discussions with Amazon without having some kind of firm agreement with them,” Berke said.

“One of the rules of economic development over the last several years is that we don’t talk about ongoing discussion. Now, if there’s going to be an agreement, we should have an agreement with them before we start talking about it.”

Two lawmakers have filed legislation that would require Amazon to collect the sales tax. When one of the sponsors, Sen. Randy McNally, R-Oak Ridge, suggested a two-year grace period on collecting the tax might be an answer, Haslam said that would leave the arrangement uncertain.

Haslam said Friday he has not personally had any direct conversation with Amazon, with Roberts taking the lead.

“We’re going to honor our commitment to them, but we would love to figure out a way long-term for them to pay (collect) sales tax and to build an employee base here,” Haslam said.

The issue has become ticklish for the state since it is highly interested in increasing the number of jobs in Tennessee, but there is a concern that it creates a double standard that hurts other retailers who collect the sales tax.

An opinion from state Attorney General Robert Cooper said distribution centers, like the ones Amazon is constructing, would present enough physical presence to require the tax collection and that the legislation sponsored by McNally and Rep. Charles Sargent, R-Franklin, would be constitutionally defensible.

Lt. Gov. Ron Ramsey has expressed frustration that he cannot learn the specifics of the Amazon deal, and at one time Ramsey attempted to meet with Matt Kisber, commissioner of Economic and Community Development under Bredesen, about the arrangement. But Ramsey has said he never got his answers from Kisber.

Haslam was asked Friday if, when an arrangement with Amazon is reached, the public would be informed what it is.

“Sure,” Haslam said. “You bet. You bet.”

Haslam was also asked about the time frame for a deal.

“It’s too early to say that,” he said. “We’re in discussions with them. I’d love to have some sort of agreement with them where we all do that by the time the Legislature comes back (in January). Remember, in the context of all this, there’s quite a bit of controversy in the Legislature about how this should go forward. So it’s not solely an administration decision what happens here.

“We’d love to come to an agreement that works where the Legislature says, ‘OK, that’s the right approach for the state of Tennessee long-term,’ and Amazon says, ‘Great, we can live with that, and we will grow and expand in Tennessee.'”

A call Friday to the media office at Amazon’s corporate headquarters was not returned.

Haslam said he does not believe the attorney general’s opinion has changed the administration’s approach to the issue.

“Obviously, the Legislature is a major factor in what gets worked out with anything in the state of Tennessee. It’s not different with Amazon than any other item, and so I think Amazon is aware of that,” Haslam said.

“We’re continuing to have conversations. I’m not going back at all in what the state has told Amazon. I’d like to work out something where we took this issue off the table, and Amazon says, ‘Great, we can live with that,’ the state of Tennessee says, ‘Great, we can live with that, too,’ and we have a great relationship.”

Haslam said he did not believe the recent announcement of the distribution center in Lebanon changed the dynamics of the negotiations with Amazon, and he noted that the company has talked of even more distribution centers in the state. Haslam also pointed out that individuals who buy an item online are supposed to pay the tax regardless of the business’s status.

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Categories
Business and Economy Tax and Budget Transparency and Elections

Amazon’s Tax Treatment Draws Barbs from Women’s Business Group

Advocates for small retail businesses say instead of focusing on big splashy job creation announcements, Tennessee policymakers should wake up to potential job losses resulting from those splashes.

As Tennessee launched its latest back-to-school sales tax holiday for the weekend, the president of a national nonpartisan group supporting women-owned businesses and a Tennessee small business owner held a teleconference Friday trying to draw attention to the adverse impact of e-commerce on the state.

Barbara Kasoff, president of Women Impacting Public Policy, and Maggie Jetter, owner of the Tweed Baby Outfitters store in Nashville, made their pitch for economic fairness and fielded questions from reporters Friday about the sales tax holiday. The looming figure in the discussion was Amazon.com.

Amazon has become a white knight in the eyes of people trying to create lots of jobs in a short amount of time, with the online retail giant recently launching three large distribution centers in the state, and the possibility of even more. But at least some small businesses don’t see Amazon that way.

“I know they’re speaking about creating 1,500 new jobs, but you also have to keep in mind that with Amazon bringing a large company to Tennessee that’s not paying sales tax, you’re definitely coming close to putting out a lot of small businesses and losing even more than 1,500 jobs,” Jetter said.

Jetter and Kasoff offered no numbers in Friday’s conference call to back up the claim that job losses match the job gains, but Kasoff said small businesses create 93 percent of all new jobs.

“If small business retailers such as Maggie are not able to add jobs, that’s going to have a far-reaching and very significant impact on the economy,” Kasoff said.

Small retail advocates say it’s not simply that the brick-and-mortar stores are losing business to big online retailers but that losses in small businesses can hurt an entire community. When online retailers are exempt from collecting sales taxes, it puts a dent in the revenue streams for small governments and by extension, the services they provide.

Jetter said she can literally see the impact of online retailers on her store, which carries apparel for children, diaper bags and other baby products. She sees people come in so they can look, touch and feel the merchandise, then exit to go buy it online with no sales tax.

“I see it especially with this generation of parents,” she said. “A lot of the grandparents do shop here, but a lot of parents have all the online blogs and websites to find their deals, to register on Amazon, to get their diaper bags on there, which are one of our higher-priced items, which helps us pay the rent.”

Jetter said she is aware of Tennessee Gov. Bill Haslam’s offer to lead the call for national action urging Congress to level the playing field for states. But Kasoff was asked if it’s realistic to believe Congress would act to force handing over more taxes.

“Now that the (debt-reduction) votes of the past week are behind us, we hope that focus is going to be on building economic stability,” Kasoff said. “I think they’re going to take a hard look at this. I think the state legislatures across the country are going to be taking a hard look.

“We have to stabilize the economy. We have to bring some sense of stability and confidence back to consumers.”

Kasoff said sales tax holidays are an example of putting small retailers on a level playing field. While there is constant debate as to whether people are boosting business or simply shifting the timing of their purchases, Jetter said she definitely expected to see more business because of the brief sales tax break.

“This is just our second year as a brick-and-mortar store, but I do expect to see a lot of families here,” Jetter said. “I expect to see a good 10 to 20 percent more shopping because of tax-free items.”

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