published Thursday, July 28th, 2011

A threat to local jobs

It is reasonable that former Gov. Phil Bredesen made an agreement with online retailer Amazon so Seattle-based Amazon would not have to collect Tennessee sales taxes when it builds two large distribution centers in Hamilton and Bradley counties. Current Gov. Bill Haslam stands by the deal.

After all, customers will not be walking into the Tennessee centers to make purchases, as they might walk into a retail store and make purchases on which sales taxes would of course be collected. The distribution centers simply don’t amount to stores.

But for months, some state lawmakers have been trying to renege on the promise to Amazon and force the company to collect Tennessee sales taxes after all.

That is a dangerous economic game and a serious threat to local jobs. Amazon is spending $139 million to build the Hamilton and Bradley County facilities, which will provide 1,400 full-time jobs and about 2,000 more part-time jobs. That is economic growth that can be of tremendous benefit to our area. And yet it is being threatened by lawmakers who now propose to give Amazon only a two- or three-year delay after Amazon opens the distribution centers before it must begin collecting sales taxes.

Apart from the fact that Amazon’s distribution centers are not traditional stores that would naturally be expected to collect sales taxes, the threat to force Amazon to start collecting the taxes, after it was told it would not have to, could give Tennessee a reputation for not upholding its agreements.

“The state has to keep the deals it’s made, ...” said House Majority Leader Gerald McCormick, R-Chattanooga. “We don’t need to get the reputation of changing deals after we’ve signed off on them.”

Reneging now on the agreement with Amazon is a bad idea that could have long-term negative consequences not only for our local economy but for the economy of the entire state.

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nucanuck said...

A Tennesseean shopping on-line for a TV might easily find the same product at, say, Walmart and Amazon at approximately the same price with only the sales tax advantage between them. Amazon gets the sale virtually every time.

If the State wishes to distinguish between in-place retailers and on-line sales, then it should apply to ALL on-line sales from ALL merchants rather than advantage one above the rest.

Longer term, advantaging on-line retailing over in-place retailing will actually destroy more existing in-place jobs than will be created by on-line marketing. So yes, we get more jobs now with the Amazon special privelege deal, but we hurt the existing retail merchants, who will reduce local staffing as their sales volume diminishes.

Instant gratification often comes with a delayed disadvantage.

July 28, 2011 at 11:07 a.m.
nucanuck said...

L4F,

I have bought two 32" TVs on-line in the last year, but that wasn't the point that you apparently missed. I am quite surprised however, to see you championing government favoritism of one business over another. Aren't you a Libertarian?

July 28, 2011 at 11:58 p.m.
TNCitizen said...

Was the Amazon deal done lawfully? Does the Governor have authority to waive enforcement of laws already on the books for the benefit of a single taxpayer?

July 29, 2011 at 1:14 p.m.
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