Business and Economy Tax and Budget Transparency and Elections

Amazon Announces Tennessee ‘Fulfillment Center’ 3.0

Upping the stakes and adding drama to the tax-collection dilemma in Tennessee, the company announced plans Thursday for a 500,000-square-foot distribution center in Lebanon.

The company said the facility will create hundreds of full-time jobs and that it plans to open the site this fall.

There was no immediate announcement on whether Amazon would have the same arrangement with the state on sales tax collections with the addition of the Lebanon site as the company currently enjoys with sites in Hamilton and Bradley counties.

Amazon does not have to collect taxes on sales in the state, which has been an ongoing issue in the Legislature. Some prominent GOP lawmakers favor requiring the company to collect the tax. Several states face a similar quandary in dealing with the online sales giant.

The trade-off, begun with the administration of former Gov. Phil Bredesen, has been the number of jobs Amazon brings to the state at a time Tennessee is desperate for employment.

Gov. Bill Haslam has publicly backed the arrangements of the previous administration with Amazon, and he has said he believes Congress ultimately will have to settle the tax issue for states. Haslam told reporters Thursday his administration is interested in “jobs, period” and that Amazon had been working on the Lebanon site “for some time.” Amazon released a formal announcement about the site Thursday afternoon.

When asked Thursday afternoon for comment about Amazon, Yvette Martinez, a spokeswoman for the governor, replied by e-mail, “Hundreds of jobs for Middle Tennessee is great news.”

Rep. Linda Elam, R-Mt. Juliet, said the deal was a “wonderful” coup for Lebanon, but she said she did not know specifics about the sales tax arrangement.

“I would imagine it’s all under the same framework they agreed to previously,” Elam said. “I wasn’t involved in those talks.

“There are two ways to look at that. Are they all covered under the same deal, or do they have to be treated as they would have absent that agreement with the prior governor? On the other hand, you look at it and say because of that agreement with the prior governor they’re bringing thousands of jobs to three locations in Tennessee.”

Rep. Charles Sargent, R-Franklin, chairman of the House Finance Ways and Means Committee, the House sponsor of the legislation calling for Amazon to collect from customers, said Thursday he had been unaware that the announcement about Lebanon was coming.

“I’m glad to see companies want to locate here in Tennessee,” Sargent said. “I think it’s a great opportunity for people in Tennessee, anywhere in the state.”

When asked if he still planned to pursue efforts to force the company to collect the sales tax, Sargent reiterated his previous position.

“I’m going to get with the governor, Speaker (Beth) Harwell, Leader (Gerald) McCormick and see how they want to proceed on the bill, if they want to proceed, and where we’re going to head on that,” Sargent said.

“I don’t know what the incentive was to bring them to Wilson County, nor do I know what contract was signed on getting them there.”

Sargent said he knew Amazon was looking at one or two more locations in Tennessee, which has been broadly discussed for several weeks, but that he had not spoken with the governor or with legislators representing the Lebanon area on the issue.

State Attorney General Robert Cooper has issued an opinion that distribution centers like those in Amazon’s plans create nexus, meaning they represent enough physical presence in the state to warrant legislation forcing a company to collect the tax. Cooper’s opinion said the legislation by Sargent and Sen. Randy McNally, R-Oak Ridge, would be constitutionally defensible.

McNally, reached Thursday night, said it’s hard to comment on the specifics of the deal on the Lebanon site when Tennesseans still don’t know exactly what the original agreement was.

“Unfortunately, I nor the people of Tennessee know what the ‘deal’ is,” McNally said. “I guess it would depend on how it was written.

“It could be written that it just applies to the facilities in Bradley and Hamilton county, or it could be written generally that they would not consider the distribution center nexus, and that brings up some issues.”

McNally voiced concern about the erosion of the sales tax base and the issue of secrecy on the original deal.

“I think everybody’s glad to see the jobs come to Tennessee, but I think we need to certainly answer the questions about what the deal is and the fairness of the deal,” McNally said. “And are we treating one business one way and treating businesses that are in a similar situation differently?”

Paul Misener, vice president for Amazon Global Public Policy, who appeared before Tennessee legislators this year, referred to Haslam and legislators in an official press release from Amazon on Thursday.

“We’re grateful to Governor Haslam, Senator Beavers, Representative Elam, Mayor Craighhead, Mayor Hutto and other officials who have demonstrated their commitment to Amazon jobs and investment,” Misener said.

Those other officials are Sen. Mae Beavers, R-Mt. Juliet, Lebanon Mayor Philip Craighead and Wilson County Mayor Randall Hutto.

An attempt to reach Beavers on the announcement Thursday was unsuccessful, but during the legislative session this year, Beavers expressed concern about the tax policy on Amazon.

“I think we’ve got to be very cautious on giving all of these tax breaks to companies because ultimately the taxpayers in Tennessee end up paying for it,” Beavers said in May. “I’m not sure how many jobs we’re talking about, and that would have an impact on some things I think. We just keep giving company after company tax breaks. How long can we afford to do that?”

Craighead, the Lebanon mayor, expressed his gratitude to state officials for their role in landing the Amazon site and gave special credit to the Joint Economic Community Development Board of Wilson County and its executive director, G.C. Hixson, for work on the plan.

“They don’t get a lot of the credit, but they do 95 percent of the work,” Craighead said of the board.

Craighead said he was unaware of any of the terms discussed on sales tax collections.

Tax and Budget

TN House Finance Chair Wants Amazon to Collect Sales Taxes

Rep. Charles Sargent, R-Franklin, plans to push legislation geared toward forcing to collect sales taxes. But he also wants input from Tennessee Gov. Bill Haslam and the legislative leadership on the issue.

Sargent is chairman of the House Finance Ways and Means Committee. While attending the Southern Legislative Conference in Memphis Monday Sargent told TNReport he is “very happy” with a recent opinion by state Attorney General Robert Cooper, who opined that the kind of distribution centers Amazon wants to put in Tennessee do qualify as nexus — or sufficient retail presence — to warrant having to collect the tax. Cooper also said the legislation offered by Sargent and Sen. Randy McNally, R-Oak Ridge, would be constitutionally defensible.

Sargent said he and the others would be studying the issue in the next 90 days.

“I want to get with the Treasurer (David Lillard) and the leadership and the Speaker (Beth Harwell) to see how they would like to proceed on this,” Sargent said. “Senator McNally and I will work on that and see where the governor and the leadership would like to go.”

But Sargent made his personal desire clear.

“I am definitely looking at proceeding on it,” he said. “We had a half-hour discussion this morning on this (at the legislative conference). At some point in time we’re going to have to do something to be fair to all companies in the state of Tennessee.

“So my initial reaction is, yes, I’d like to proceed on this, but I want to make sure we have the backing of the governor and the leadership in general.”

Sargent had used some of the strongest language of any legislator to express his opinion on Amazon, even as the legislation’s sponsors were pulling back their bill in this year’s session, in part to hear from the attorney general.

“We can find no legal basis for this alleged agreement. None,” Sargent said in a subcommittee meeting in May. “Nobody is above the law, and nobody can cut deals to circumvent the law.”

The Amazon deal had been struck by members of the administration of Gov. Phil Bredesen, whose term ended this January. But many lawmakers, especially those in the Chattanooga area where Amazon is building two distribution centers, have expressed support for allowing the company to skip collecting the tax.

McNally recently suggested allowing Amazon a two-year “grace period” before a requirement to collect the tax kicks in, and Sargent said Monday, “I can live with that to get their expenses recouped, some of the costs and things of that nature.”

But Haslam has said such a move would leave the situation too uncertain. The governor has repeatedly called for a national solution to the issue. But Haslam also acknowledges that Congress looks reluctant to act because it would look like it would be advocating raising taxes, leaving states to continue to deal with the issue. Amazon itself is on record as saying it would be best to have a national solution.

Sargent said Monday some of Amazon’s arguments against the deal are unfounded.

“They are collecting in five or six states right now,” Sargent said. “So it does fit the business model. They say it doesn’t fit their business model, but if they’re collecting in five or six states it does fit their business model.”

Amazon currently collects the taxes in Kentucky, Kansas, New York, North Dakota and Washington.

The company has said it may put other distribution centers in Tennessee, with possible sites in Nashville or Knoxville. New facilities would potentially complicate the issue since Amazon would get the break on its first two sites but possibly not the others.

“We cannot be held hostage because they say, ‘We’ll build two more facilities if you don’t tax us,’” Sargent said. “That’s not the way we should be running this.”

Business and Economy Tax and Budget Transparency and Elections

McNally Seeks Compromise on Amazon Deal

Sen. Randy McNally, R-Oak Ridge, chairman of the Senate Finance Committee, is suggesting allowing a two-year “grace period” on collecting Tennessee sales taxes as a possible compromise on the issue of the state’s arrangement with the Internet sales giant.

McNally still prefers his original proposal — forcing Amazon to collect sales taxes like other retailers in the state. A recent opinion by the state attorney general gives McNally what would appear a green light for his legislation, which is carried by Rep. Charles Sargent, R-Franklin, in the Tennessee House.

But McNally, recognizing the political obstacles of getting the legislation through, sees putting off the sales tax collections as a possible way to help solve the matter.

Lawmakers interested in making Amazon collect the taxes put their legislation on hold this year, pending Attorney General Bob Cooper’s opinion, which came down last week in their favor.

Amazon has become a complex issue for state government. Its two distribution centers being established in Hamilton and Bradley counties are seen as tremendous job creators at a time the state desperately needs them. Yet the arrangement that allows Amazon off the hook for collecting sales taxes has become an item that won’t go away, since it means forfeiting the revenue that could be derived from its sales and creates an uneven playing field with Amazon’s competitors.

McNally said he feels a strong responsibility to protect the state’s revenue stream. But the deal struck by the administration of former Gov. Phil Bredesen with Amazon has complicated the issue.

The Bredesen team decided it was more important to bring the jobs accompanying the two distribution centers to the state than to see the company go elsewhere, where the state would end up with nothing. Many members of the current Legislature, especially the contingent from the Chattanooga area, support the no-tax deal.

McNally told TNReport he knows the Haslam administration is negotiating some with Amazon, which has indicated it might bring even more distribution centers to the state, and that he believes the current administration will be forthcoming on whatever terms are negotiated.

“I’d like to see what the administration is able to negotiate,” McNally said Tuesday. “Given what’s happened, if they allowed them to be exempt from collecting the sales tax for a couple of years, I think some type of arrangement like that would be in the best interest of the state.”

McNally also said he believes a strong possibility could be a lawsuit brought by other retailers who do not get the same luxury as Amazon. The Haslam administration has said it wants to honor prior commitments made to the company.

The attorney general’s opinion bolstered the concept — at least from a legal standpoint — of forcing Amazon to collect the taxes. Cooper said the presence of distribution centers, which some have simply called warehouses, creates “nexus” under state law, meaning there is a substantive retail presence of Amazon in the state, even if it is not a conventional retail center. Amazon calls the facilities “fulfillment centers.”

Cooper also said legislation that would require the tax collections would be constitutionally defensible.

Under other circumstances, Cooper’s opinion might prompt lawmakers to proceed, and McNally and Sargent could still do so, if they choose. But McNally called that strategy an “uphill battle.”

“Amazon has lobbied pretty well on this issue,” he said.

Several lawmakers have expressed frustration in being unable to learn exactly what Amazon got from the Bredesen administration. Lt. Gov. Ron Ramsey had attempted to talk to Matt Kisber, the commissioner of Economic and Community Development under Bredesen, about what deals were made in the last weeks of the Bredesen administration. But when asked last month if he ever was able to have that conversation with Kisber, Ramsey said no.

McNally continues to express frustration.

“My concerns are, No. 1, (the deal) is a secret incentive nobody else knows about or gets,” McNally said. “I think the public at some point should have a right to know: What are the terms of some of these incentives that state and local government give companies to come in and build the facility?

“Second, it treats one out-of-state retailer with nexus different from other out-of-state retailers with nexus. Eventually, we could see a court case come down on that issue.

“Third, it erodes the tax base. We can invest a little into industries that come into the state, and Amazon has received a pretty good deal as far as local and county property taxes. It also received a jobs tax credit. This was sort of the Cadillac of deals.”

He sees long-term ramifications from such arrangements.

“I think, eventually, if we keep doing things like this, we would be in trouble as far as sales tax revenues in the state,” McNally said.

Tennessee is not alone in dealing with the Amazon dilemma. Several states have grappled with the issue, and South Carolina actually reversed course after sensing that Amazon would leave, granting the company the ability to operate without collecting sales taxes.

“Forever and ever not to have to collect sales taxes in the state, particularly when other retailers similarly situated have to, is just wrong,” McNally said.

Amazon does collect the tax in five other states — Kansas, Kentucky, New York, North Dakota and Washington — where it has offices or other physical presence. is a nonprofit news service supported by generous donors like you.

Press Releases

Haslam Signs Meth Bill

Press Release from Gov. Bill Haslam, June 6, 2011:

Announces Funding for Meth Lab Cleanup and Communication Campaign Against Meth Manufacture and Use

GREENEVILLE – Tennessee Gov. Bill Haslam today signed into law a multi-faceted bill to help combat the increasing problem of methamphetamine manufacturing and use in Tennessee. Law enforcement officials seized 2,082 meth labs in Tennessee in 2010, a record number.

Law enforcement officials, legislators, representatives from the pharmaceutical industry, local officials and other key stakeholders from across the state joined Haslam on the steps of the Greene County Courthouse as he signed the bill into law.

“This bill helps us to confront Tennessee’s meth problem head on and is a comprehensive approach to addressing a serious problem in our state,” Haslam said. “I want to thank Safety Commissioner Bill Gibbons for his leadership on this issue along with the sponsors of the legislation and all of the parties that came to the table and worked to make this legislation meaningful.”

The sponsors of the bill include Sen. Mae Beavers (R-Mt. Juliet), Sen. Randy McNally (R-Oak Ridge), Rep. David Hawk (R-Greeneville) and Rep. Debra Maggart (R-Hendersonville).

Many of the key provisions of the law take effect July 1, 2011. The legislation aims to tackle Tennessee’s meth problem in a variety of ways:

  • It increases the penalty for making meth in the presence of children;
  • tracks the sale of products containing pseudoephedrine, which is a key ingredient in making meth;
  • makes that sales information available promptly to law enforcement;
  • makes it easier to prosecute those who purchase pseudoephedrine products at different times and places for the purpose of exceeding the allowable amount, or through use of false identification;
  • and imposes minimum mandatory fines on those offenders.

During the event, Haslam also announced the availability of more than $1 million to assist in meth lab cleanup:

  • $750,000 in state appropriations to the Tennessee Bureau of Investigation (TBI);
  • and $280,000 in federal Byrne JAG grant funds from the state of Criminal Justice Programs (OCJP) available to TBI.

Working with the TBI, the Tennessee Meth Task Force will purchase special storage containers and additional supplies for the disposal of meth waste. The containers will be placed at secure locations across the state.

The OCJP has also committed a $200,000 grant to the Tennessee Department of Safety and Homeland Security to fund a targeted communication campaign to educate and warn citizens of the consequences of violating the new law, specifically making meth in front of children and purchasing pseudoephedrine for non-medical or illegal purposes.

The Consumer Healthcare Products Association will make a $25,000 donation to the Tennessee District Attorneys Association for the communication campaign.

The communication campaign will be a collaborative effort that includes the Tennessee Department of Safety and Homeland Security; Tennessee Meth Task Force; Tennessee Department of Children’s Services; Tennessee District Attorneys General Association; Tennessee Association of Chiefs of Police; Tennessee Sheriffs’ Association; Consumer Healthcare Products Association; Tennessee Pharmacists Association; and Tennessee Alliance for Drug Endangered Children.