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Press Releases

TN Tax Holiday: August 1-3

Press release from the Tennessee Department of Revenue; July 15, 2014:

The Department of Revenue reminds Tennesseans they can buy certain items without paying sales tax August 1 through August 3.

During these three days, Tennessee shoppers can save nearly 10 percent on clothing, school supplies and computers.

“This holiday offers Tennesseans great savings on important back-to-school items, and I encourage everyone to take advantage of this opportunity,” Gov. Bill Haslam said.

The sales tax holiday begins Friday, August 1 at 12:01 a.m. and ends Sunday, August 3 at 11:59 p.m. During this weekend, consumers will not pay state or local sales tax on clothing, school and art supplies that cost less than $100 per item and computers that cost $1,500 or less.

“We hope Tennessee shoppers will take advantage of the tax relief offered by this year’s sales tax holiday,” Revenue Commissioner Richard Roberts said.

Examples of items that can be bought tax-free during the holiday include:

Clothing: Shirts, dresses, pants, coats, gloves and mittens, hats and caps, hosiery, neckties, belts, sneakers, shoes, uniforms and scarves.

School Supplies: Binders, book bags, calculators, tape, chalk, crayons, erasers, folders, glue, pens, pencils, lunch boxes, notebooks, paper, rulers and scissors.

Art Supplies: Clay and glazes; acrylic, tempera and oil paints; paintbrushes for artwork; sketch and drawing pads; and watercolors.

Computers: Central processing unit (CPU), along with various other components including monitor, keyboard, mouse, cables to connect components and preloaded software. (Note: While the CPU may be purchased separately, other items must be part of a bundled computer package in order to be eligible.) iPads and other tablet computers are eligible for tax exemption, but smart phones and video game consoles are not.

For more information, please visit www.tntaxholiday.com. You can also email the Department of Revenue at salestax.holiday@tn.gov or call (800) 342-1003. Staff is available to answer questions Monday through Friday 7 a.m. to 5 p.m. Central Time. (Out-of-state and Nashville-area callers, please dial (615) 253-0600.)

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Press Releases

Finney Calls for Review of Job Tax Credits Program

Press release from the Office of State Sen. Lowe Finney, D-Jackson; November 18, 2013:

NASHVILLE – Troubled by a recent audit that found state government can’t say whether companies are creating jobs in exchange for tax credits they’ve received, state Sen. Lowe Finney requested a review of state contracts to be presented during the 2014 legislative session.

“I brought ‘claw back’ legislation to protect taxpayers if promises of new jobs for tax credits are broken,” state Sen. Lowe Finney said. “According to this audit, the administration wouldn’t know when to ‘claw back’ taxpayers’ money.”

Sen. Finney sponsored SB 0605 during the last legislative session, which directs the Department of Economic and Community Development to include “claw back” provisions in all contracts to ensure the state has the authority to take back any incentives awarded to companies that don’t create jobs.

A recent audit by the comptroller’s office found that the Department of Revenue “could not provide evidence that companies audited complied with state law” for tax credits awarded to the 27 companies audited between Jan. 1, 2010 and June 30, 2012.

In a letter to Department of Revenue Commissioner Richard Roberts, Sen. Finney requested a thorough review of those contracts and the jobs created to be presented to the Senate Finance Committee during the 2014 legislative session.

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Press Releases

TN Sales Tax Holiday Scheduled for August 2-4

Press release from the Tennessee Department of Revenue; July 17, 2013:

Nashville, Tenn. – The Department of Revenue is reminding Tennesseans that the seventh annual Sales Tax Holiday is scheduled for Friday, August 2 through Sunday, August 4. During these three days Tennessee shoppers can save nearly 10 percent on tax-free clothing, school and art supplies, and computer purchases.

“I want to encourage Tennessee families to take advantage of the Sales Tax Holiday because it was created with them in mind,” Gov. Bill Haslam said. “The weekend provides savings for families, especially as students are starting the new school year, and the holiday can provide relief on clothing, school and art supplies and computer purchases.”

The holiday begins Friday, August 2 at 12:01 a.m. and ends Sunday, August 4 at 11:59 p.m. During the designated three-day weekend, consumers will not pay state or local sales tax on clothing with a price of $100 or less per item, school and art supplies with a price of $100 or less per item, and computers with a price of $1,500 or less.

“As in years past, last year’s tax-free weekend was very successful, providing Tennessee taxpayers over $10 million in tax savings” said Revenue Commissioner Richard H. Roberts. “We are hopeful that Tennessee shoppers will again take advantage of the tax relief provided by the 2013 Sales Tax Holiday.”

Please visit the Sales Tax Holiday Web site at www.tntaxholiday.com to learn more about the items exempt from sales tax. The Tennessee Department of Revenue also assists consumers via e-mail, Salestax.Holiday@TN.gov, and through its toll-free statewide telephone hot line, (800) 342-1003. Staff is available to answer questions Monday through Friday 7 a.m. to 5 p.m. Central Time. (Out-of-state and Nashville-area callers, please dial (615) 253-0600.)

Examples of exempt items include:

  • Clothing: Shirts, dresses, pants, coats, gloves and mittens, hats and caps, hosiery, neckties, belts, sneakers, shoes, uniforms whether athletic or non-athletic and scarves
  • School Supplies: Binders, book bags, calculators, tape, chalk, crayons, erasers, folders, glue, pens, pencils, lunch boxes, notebooks, paper, rulers and scissors
  • Art Supplies: Clay and glazes; acrylic, tempera and oil paints; paintbrushes for artwork; sketch and drawing pads; and watercolors
  • Computers: Central processing unit (CPU), along with various other components including monitor, keyboard, mouse, cables to connect components and preloaded software (Note: While the CPU may be purchased separately, other items must be part of a bundled computer package in order to be eligible.) iPads and other tablet computers are eligible for tax exemption, while smart phones and video game consoles are not.

The Department of Revenue is responsible for the administration of state tax laws and motor vehicle title and registration laws established by the legislature and the collection of taxes and fees associated with those laws. The Department of Revenue collects approximately 87 percent of total state tax revenue. During the 2012 fiscal year, the department collected $11.3 billion in state taxes and fees. In addition to collecting state taxes, the Department of Revenue collects taxes for local, county and municipal governments. During the 2012 fiscal year, local government collections by the Department of Revenue exceeded $2.0 billion in local taxes and fees. In collecting taxes, the department enforces the revenue laws fairly and impartially in an effort to encourage voluntary taxpayer compliance. The department also apportions revenue collections for distribution to the various state funds and local units of government. To learn more about the department, log on to www.TN.gov/revenue.

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Press Releases

Grocery Tax to Decrease July 1

Press release from the Tennessee Department of Revenue; June 11, 2013:

Nashville, Tenn. – On May 13, 2013, Gov. Bill Haslam signed into law a reduction in the state sales and use tax rate on sales of food and food ingredients. Effective July 1, 2013, the state sales and use tax rate on sales of food and food ingredients will be reduced from 5.25% to 5%.

With the change, food and food ingredients will be subject to a reduced state sales and use tax rate of 5% plus the applicable local sales and use tax rate. Prepared food, dietary supplements, candy, alcoholic beverages and tobacco continue to be subject to the general state sales and use tax rate of 7% plus the applicable local sales and use tax rate. Existing laws defining which items are considered food and food ingredients remain unchanged by the new legislation.

Businesses selling food items subject to the reduced rate of sales and use tax are advised to begin making the necessary changes to allow for the new rate beginning July 1, 2013. Changes to cash registers and accounting systems should be completed by the July 1, 2013 effective date. Businesses must continue to collect and remit the existing 5.25% tax on sales of food and food ingredients made through June 30, 2013 to the Department of Revenue.

The Department of Revenue is responsible for the administration of state tax laws and motor vehicle title and registration laws established by the legislature and the collection of taxes and fees associated with those laws. The Department of Revenue collects approximately 87 percent of total state tax revenue. During the 2012 fiscal year, the department collected $11.4 billion in state taxes and fees. In addition to collecting state taxes, the Department of Revenue collects taxes for local, county and municipal governments. During the 2012 fiscal year, local government collections by the Department of Revenue were $2.2 billion. In collecting taxes, the department enforces the revenue laws fairly and impartially in an effort to encourage voluntary taxpayer compliance. The department also apportions revenue collections for distribution to the various state funds and local units of government. To learn more about the department, log on to www.TN.gov/revenue.

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NewsTracker

On Food Tax Cut, Another Option

A bill aimed at encouraging Tennesseans to eat healthier by eliminating the sales tax on unprepared foods like fruits and vegetables is headed to the House Agriculture and Natural Resources Committee next week.

But House Bill 484 still has a steep hill to climb before becoming law because of the huge estimated drop in tax revenue – more than $90 million for state and local governments. Still, Rep. Ron Lollar, chair of the Agriculture and Natural Resources Subcommittee, said there is a possibility some version of it could be rolled into Gov. Bill Haslam’s initiative to reduce the sales tax on groceries another quarter of a percent.

“The premise behind the bill is we can still be conservative fiscally and reduce sales taxes, but also incentivize Tennesseans to purchase the kinds of food that would help incentivize them to eat well,” Rep. Ryan Williams, the bill’s sponsor, told the committee Wednesday afternoon.

Williams explained that the bill would eliminate the sales tax on unprepared food such as fruits, vegetables, dairy, raw meats or “things that are called building block ingredients, like flour, dried beans.

For example, if someone bought a bag of apples, a fresh chicken and a gallon of milk for $10, she would pay only $10, not $10.53, which is what it would cost today with the 5.25 percent sales tax added.

“We’re 12th in the nation in obesity. Last year alone, we spent $216 million in TennCare alone just to treat diabetes among Tennesseans,” Williams said.

The Cookeville Republican acknowledged that the fiscal note “is huge,” but said he is working with the Department of Revenue on ways to reduce the amount or the foods on which the taxes would be eliminated.

The fiscal note, which is attached to the Senate companion, SB550, predicts that the net decrease in state revenue for fiscal year 2013-2014 would be almost $87.5 million, while the net decrease in local revenue for the same period would be $3 million.

Williams explained that one of the challenges with the fiscal note is that unprepared food can be defined differently in economics than they are to the consumer.

“For example, a Milky Way® bar is defined as candy, while a Twix® bar is defined as food because it has flour in it,” Williams said in an interview after the committee meeting.

However, he said that the Department of Revenue has given him some ideas on how to narrow the definition of unprepared food as it relates to the bill to have less impact on the reduction of revenues.

Lollar acknowledged that the bill could be killed once it reaches the finance committee of either chamber.

“We’re not saying that it would definitely fit in with the governor’s plan, but it would certainly have an opportunity with this bill to then go on and explore some items in the cuts that the governor’s already set forward.”

SB 550, sponsored by Republican Sen. Frank Niceley from Strawberry Plains, is on the Monday calendar of the Senate Tax Subcommittee of the Finance, Ways and Means Committee.

Amelia Morrison Hipps may be reached at amhipps@capitolnewstn.com, on Twitter @CapitolNews_TN or at 615-442-8667.

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Press Releases

State Offers Instructional Videos to Assist Taxpayers with Difficulties of Tax Time

Press release from the Tennessee Department of Revenue; January 11, 2013:

Nashville, Tenn. – At the beginning of a new year, many taxpayers begin to think about their taxes. Navigating through the sea of forms, instructions, and calculations can seem to be a difficult task and is a real challenge for many Tennesseans.

The Tennessee Department of Revenue announced today that the first installment of their Tennessee Tax Video Series is now available on the department’s website, www.TN.gov/revenue. The first video addresses registration for electronic filing. Many of Tennessee’s tax returns and payments are required to be made electronically by law. This instructional video lets taxpayers know exactly what is required to get the on-line tax process started.

“Tennessee’s tax structure depends on taxpayers voluntarily complying with the laws,” said Revenue Commissioner Richard H. Roberts. “We want to offer taxpayers assistance in every way possible. We have other help available during normal business hours, but having instructional videos available 24 hrs. a day, seven days a week allows taxpayers to access key information whenever they’d like. We look forward to being able to expand our selection of videos significantly in the future.”

Other upcoming videos will include how to file a sales tax return and payment electronically and how to properly file a business tax return and payment on-line. Future installments will address other common state tax issues involving many other subjects.

In addition to the new instructional videos, the Department reminds taxpayers that telephone service is available from 7 a.m. to 5 p.m., Central time, Monday through Friday, excluding holidays at (800) 342-1003 (toll-free in Tennessee) or at (615) 253-0600 (Nashville and outside Tennessee). The department’s website – www.TN.gov/revenue – also has information on many tax issues as well as vehicle titling and registration. E-mail service is also available at tn.revenue@tn.gov.

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Press Releases

TN Offers Assistance for Business-Related Taxes

Press release from the Tennessee Department of Revenue; January 4, 2012:

Nashville, Tenn. – The Tennessee Department of Revenue announces its next series of free bimonthly tax workshops to be held in Chattanooga, Johnson City, Knoxville, Memphis and Nashville.

TN Offers Assistance Business-Related Taxes

Chattanooga: January 16, from 8 a.m. to 1:15 p.m. at the department’s Chattanooga regional office, located at 540 McCallie Avenue. The workshop will be held in conference room 607.

Johnson City: January 10, from 8 a.m. to 11:45 a.m. at the department’s Johnson City regional office, located at 204 High Point Drive.

Knoxville: January 16, from 8 a.m. to 12:30 p.m. at the department’s Knoxville regional office, located at 531 Henley Street, suite 606.

Memphis: January 10, from 8:30 a.m. to noon at the Renaissance Business Center, located at 555 Beale Street. The workshop will be held in the Memphis Training Room.

Nashville: January 22, 8:30 a.m. to 1:30 p.m. at the department’s Murfreesboro Road office, located at 1321 Murfreesboro Road, 8th Floor.

These free workshops are designed to assist those encountering business-related taxes for the first time. Tax specialists from various local and state agencies will provide the basic information needed to comply with registration and tax requirements. During the session, attendees will have the opportunity to listen to these tax specialists, ask questions and receive materials explaining tax responsibilities and providing contact information. Areas of discussion will include business tax, sales and use tax, unemployment tax and tax enforcement procedures.

Space is limited and registration is required. For more information, please call (800) 342-1003 (toll-free inside Tennessee) or (615) 253-0600 (local Nashville-area and outside Tennessee), or visit Revenue’s Web site to download the registration form.

The Department of Revenue is responsible for the administration of state tax and motor vehicle title and registration laws established by the legislature, and the collection of taxes and fees associated with those laws. The Department of Revenue collects approximately 91 percent of total state tax revenue. In collecting taxes and registering motor vehicles, the department enforces the revenue laws fairly and impartially in an effort to encourage voluntary taxpayer compliance. To learn more about the department, log on to www.TN.gov/revenue.

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Featured NewsTracker Tax and Budget Transparency and Elections

Revenue Dep’t Boat Bungle Prompts Call for Tightening Tax-Collection Rules

A dustup earlier this year between a Murfreesboro man and the Tennessee Department of Revenue over taxes on a home-built boat has led one lawmaker to consider reforming the state’s tax laws.

The problems began for Johnathan King, 39, when he attempted to register a 14-foot boat, which he had built in his garage for personal use, with the Tennessee Wildlife Resources Association. The boat, made of plywood, fiberglass overlay and epoxy, had been built with materials purchased locally, a motor purchased in Hermitage four years ago, and plans purchased over the Internet, King said.

“We were informed that we had to provide documentation, receipts and several other things on the value of the craft, and what it would be taxed at, and then the cost of building it,” King said. “And that’s really what kind of set off the debate on the tax issue, which prompted the Department of Revenue to send us that letter indicating that we were dealers.”

The term “dealer” is used in the sales and use tax laws to describe anyone with an obligation to pay tax, whether it’s on the sale or the purchase of an item, according to a statement from the Department of Revenue: “It is not the Department’s position that an individual who builds a boat from a kit or component parts is in the business of selling boats. However, tax is due on the purchase of those materials, just as it is due on any other purchase.”

The department sent King a bill amounting to over $500 for the estimated taxes on his boat, which included sales and use tax on the materials used to build the boat, as well as the threat of a lawsuit if he did not pay. King, a former employee of the Internal Revenue Service, has since gotten the bill reduced to $40.

King’s case also attracted attention from Capitol Hill.

Rep. Joe Carr, R-Lascassas, King’s representative, said the law governing King’s tax case is overly broad and ambiguous and gives state tax collectors too much wiggle room. Carr says the state should not have compelled King to pay the tax on the boat since he had already paid sales taxes on the materials.

“That’s just an example of an overbearing bureaucracy that has too much latitude with regards to how a statute or regulation can be interpreted,” Carr said.

King agrees: “I just can’t believe nobody has put their feet to the fire before now. And they still don’t really have their feet to the fire.”

The use tax, which was enacted in 1947, is used by the state “to complement the sales tax by taxing merchandise purchased from out-of-state sources that do not collect the state’s sales tax,” according to the Department homepage. The tax exists in order to protect local businesses from “unfair competition” from out-of-state merchants who don’t have to collect the sales tax.

King, who had a previous dispute with the state over a $650 tax bill on his corporation, calls the Department’s methods “thuggish at best.”

Carr, who was unable to file a bill in time to address the issue last legislative session, has said that if he is re-elected he will take the issue back up next session. He intends to file a bill to revise the wording of the state’s tax laws as to who is required to pay taxes as a dealer, as well as who is not, in order to prevent any future misinterpretations and problems for Tennesseans.

“That’s the silliness of some of these regulations, and we’ve gotta deal with it in, I think, a fairly forceful manner,” Carr said.

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

Watson Working for Tax-Ruling Transparency

Hixson Republican Bo Watson backed off state legislation this year that would bring transparency to so-called “private letter rulings” — written statements issued to taxpayers from tax-collection agencies — because he was satisfied with efforts by the Tennessee Department of Revenue commissioner to do it on his own.

But even Sen. Watson remains uncertain if the effort for more openness is workable, because of privacy issues related to the rulings.

Private letter rulings have become a point of attention in the state this year because of the ongoing controversy over Amazon.com and its exemption from collecting sales taxes. Speculation has risen that Amazon may be benefiting from a letter ruling from the state, but such information has never been made public.

In fact, Watson said his dealings with Commissioner of Revenue Richard Roberts on making letter rulings more public have had “zero” to do with Amazon in particular. He — and apparently Roberts — just want more openness on the letter rulings issued by the department. An effort to reach Roberts on Wednesday was unsuccessful.

The Knoxville News-Sentinel reported Wednesday night that the Department of Revenue has initiated a shift in policy from the previous administration. The report said the department has issued 40 letter rulings this year and that 17 redacted versions will be made public, with another 15 still under review and eight kept secret.

Watson, the new speaker pro tem of the Senate, this week described some of the difficult issues surrounding letter rulings apart from the Amazon controversy. But he also spoke about his thoughts on the Amazon issue. The company is establishing two distribution centers in the Chattanooga area, one in Hamilton County and one in Bradley County. Watson’s district is part of Hamilton County. A third Amazon center is planned for Lebanon.

Watson said conversations have gone well with Roberts in trying to open up the letter rulings.

“Revenue has been working with me very cooperatively in trying to figure out a methodology that we might be able to do that,” Watson said. “The challenge is the privacy issue.”

There are two types of private letter rulings. One addresses a specific tax question as it relates to a specific business. Then there are letter rulings where a specific company asks a question but the answer has general application.

“So you want the public to be advised of those letter rulings that have general application,” Watson said. “How do you achieve that without revealing the source of the letter ruling?”

Watson’s SB0902 would require that a copy of any revenue ruling or letter ruling issued on or after Jan. 1, 2008 be made available for public inspection in accordance with current public records law. It calls for posting the ruling on the department Web site within 15 days of the date of the ruling, and it calls for the commissioner to redact from the ruling anything, like a name or address, that may identify the taxpayer who requested the ruling.

Watson said he introduced the bill because businesses had had frustrations with the administration of Gov. Phil Bredesen, whose term ended this January.

“They would go in with a tax situation and find out that there had been a letter ruling about it, but they didn’t know anything about the letter ruling. So it frustrated their business process,” Watson said. “So anyway, I introduced a bill to make private letter rulings more public.

“The challenge is that much of the information has to be redacted because obviously a business’s tax information is their private proprietary information if they ask a specific tax question. If the tax question has general applicability, how do you get that answer out to the public without revealing the source of the question?”

Simple deduction comes into play, he said.

“If a large company asks a question and you describe them as a large company with X number of employees, people will figure out who asked the question,” Watson said. “The commissioner, in our conversation, said, ‘Look, we’re going to be much better about issuing the response to these letter rulings than perhaps in the past.'”

Watson said Roberts believes the department can make changes without necessarily having a law to do it. Watson is going to sit back and see how it goes. If the department is unable to achieve the goal, then Watson said he would at least pursue debate on the issue.

Sen. Randy McNally, R-Oak Ridge, chairman of the Senate Finance Ways and Means Committee, this week said he appreciates efforts in the administration of Gov. Bill Haslam to address transparency on letter rulings. McNally has been an active player in the attempt to get Amazon to collect the sales tax.

But the issue of letter rulings is just one facet of the broad tax-collection ramifications surrounding Amazon and other online retailers. Haslam recently said he wants Amazon to collect sales taxes in a way that satisfies Amazon and the state. Haslam has also said he wants the state to honor its original commitment to Amazon, which was made by the Bredesen team.

Watson said he was not surprised by Haslam’s remarks and that that’s what he thought would happen all along. He said he got the impression there would be more discussions from what he heard in legislative hearings on Amazon this year.

When Haslam first made public remarks this month about wanting Amazon to collect the taxes, Watson said he was in San Antonio for the legislative summit of the National Conference of State Legislatures and got a heads-up phone call from Warren Wells of the governor’s staff to let him know about Haslam’s comments.

Lt. Gov. Ron Ramsey, who was at the San Antonio conference, did not get a similar phone call.

“He did not get a call from the governor last week, but they have had ongoing discussions about this issue,” said Adam Kleinheider, a spokesman for Ramsey. “So his comments did not surprise him in any way, and he is 100 percent on board with the governor.”

The NCSL summit included a discussion of e-commerce issues. A similar session was held at the Southern Legislative Conference last month in Memphis.

“As Internet commerce continues to grow, we’re all going to have to recognize that this is a new business model, and states, along with the federal government, are going to have to figure out a way to create tax equity among all the various means of commerce,” Watson said. “I don’t think it’s reached the tipping point where Congress is going to be motivated to act.

“If you’re Amazon, you want tax equity with all the other Internet retailers that may be working under the same model you’re working under — just as the bricks-and-mortar folks want tax equity with the Internet folks.”

Watson said he hasn’t had much contact with retailers since the Legislature adjourned this year, but he has heard from constituents who say a deal is a deal and that original agreements with Amazon should be honored. He said the only contact he has had with Amazon other than the hearings was a five-minute meeting in his office prior to the committee meeting.

Watson said people need to remember that the sales tax still applies to the transaction and the question boils down to who collects the tax, not whether it is owed.

“The state doesn’t aggressively pursue that, and I don’t think we’re going to encourage them on small-ticket items to aggressively pursue that,” Watson said.

Haslam has said Congress needs to settle the issue for the states.

“All states are trying to figure out how to deal with this new marketplace,” Watson said. “The challenge is how do we modernize the law to marry up to the new Internet commercial market that in the last five years has grown exponentially?”

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Press Releases

TFT: Where is the Revenue, Justice in Amazon.com Deal?

Press Release from Tennesseans for Fair Taxation, Feb. 24, 2011:

Revenue ?with? Justice ?Report

This “Revenue with Justice Report” inaugurates an occasional service by Tennesseans for Fair Taxation (TFT) to provide fact-based analyses of pending issues related to Tennessee’s state budget, public programs, and tax policy. Recipients are free to use this material, in whole or in part, with or without attribution to TFT.

TFT is a statewide non-partisan coalition of people and groups working to assure a balanced, just, and equitable tax system in Tennessee, one that provides revenue critical to economic growth, prosperity and essential citizen services. For further information about this “Revenue with Justice Report,” be in touch with:

The? Amazon? Fast ?Shuffle

Tennessee has chosen to rely on the retail sales tax as its principal source of public revenue. Thus, it is critical that this tax be administered in a just and effective manner. For this obvious reason, the under-the-table, backroom deal that is designed to relieve Amazon of its legal obligation to collect sales taxes from its Tennessee customers and remit those tax receipts to the Tennessee Department of Revenue is unacceptable for two major reasons:

  • Tennessee, like most states, faces a serious revenue shortfall and related budget deficit. Every legitimate tax dollar, as determined by Tennessee law and the U.S. Constitution, needs to be collected.
  • Relieving Amazon of its constitutional and legal obligation—while enforcing this obligation against Tennessee-based retailers—places homegrown and Tennessee operated businesses at a severe competitive disadvantage at a time many are struggling just to stay alive.

What is going on here?

In the closing weeks of the Bredesen Administration, Amazon agreed to construct two affiliated distribution centers near Chattanooga. Details of the deal have been declared confidential but, in addition to the expected incentives of job-creation and property tax credits, money for employee training assistance, and free land, it now appears that the deal includes promises to overlook constitutional principles and Tennessee law to determine whether Amazon will be required to collect and remit sales taxes in Tennessee.

  • The Department of Revenue is planning to change a regulation under Tennessee tax law that has been in effect since 1974 (Tax regulation 1320-5-1-.96) which imposes an obligation to collect and remit sales taxes on in-state distribution centers. The proposed change will carve out an exemption for Amazon while continuing to require existing distribution centers to keep imposing the sales tax on their customers.
  • Without this change in Tennessee’s tax regulations, it is clear that Amazon’s proposed distribution activities will meet the standards, defined by the U.S. Supreme Court and the Tennessee Court of Appeals, that require a business to collect and remit the Tennessee sales tax.
  • A public hearing on the proposed regulation amendment is scheduled for Friday, February 25, 2011, at 1:30 PM CST on the third floor of the Tennessee Tower, 312 Rosa Parks Avenue, Nashville, TN.

What are the costs to Tennesseans of this under-the-table, backroom deal?

  • The deal will cost Tennessee in excess of $64 million in revenue each year. ? The City of Chattanooga will give up an estimated $720,000 each year. Hamilton County will give up $435,000 in revenue (but Amazon will pay the school tax portion of its tax bill–$430,000). ? Local retail competitors of all sorts (Amazon sells a lot more than books) will be at a permanent price disadvantage since they are legally obligated to collect retail sales tax. (Amazon’s sales topped $24 billion in 2009—one of the worst years for U.S retailers.)

What about the jobs that Amazon will create with its distribution centers?

It is estimated that Amazon will hire 1400 full time workers and 2000 seasonal workers. Here is an interesting calculation in that regard:

  • On the assumption that full time workers will average $30,000 annually and seasonal workers will be employed for two months, the total annual payroll would be in the vicinity of $55 million.
  • This cost is roughly equal to the tax revenue lost to Tennessee. So, in one sense, the citizens of Tennessee end up paying the wages of all of Amazon’s Tennessee employees each year . . . and forever!
  • Any job created by Amazon’s under-the-table, backroom deal could well be offset by the loss of employees currently working at Tennessee’s existing distribution centers, due to the unequal playing field created for Amazon.

TFT? wants? to? know: In? the ?Amazon? deal,? where ?is ?the ?revenue?? Where? is ?the ?justice?