published Wednesday, June 29th, 2011

Attorney General: State can force Amazon on taxes

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Opinion of Tennessee Attorney General Roy Cooper on taxation of Amazon
Opinion of Tennessee Attorney General Roy Cooper on taxation of Amazon

A legal opinion by Tennessee’s attorney general Tuesday affirmed the constitutionality of a proposed bill that could force Amazon to collect sales taxes on items the Internet giant sells to Tennesseans.

Also, the opinion appeared to support the contention that the building of distribution centers in the state by a company such as Amazon creates a physical presence or “nexus.”

Under U.S. Supreme Court rulings, states cannot compel out-of-state retailers to collect sales taxes from in-state customers unless they have a nexus.

However, Attorney General Robert E. Cooper Jr. in the opinion declined to specifically make the nexus opinion relative to Amazon. He said his office has a longstanding practice “to not opine about the tax liabilities of particular taxpayers premised on detailed and individualized facts.”

But Cooper said the legislation originally offered this past session of the General Assembly would be “constitutionally defensible.”

Amazon is spending $139 million to construct distribution centers in Hamilton and Bradley counties and create more than 1,400 full-time jobs and more than 2,000 seasonal slots. It also has indicated an interest to build more such centers in the state.

State Sen. Finance Committee Chairman Randy McNally, R-Oak Ridge, who sought the opinion with House Finance Committee Chairman Charles Sargent, R-Franklin, termed the opinion “very favorable.”

“The Amazon people contended this did not constitute a nexus,” McNally said. “It’s clear that the distribution center would constitute a nexus.”

Wait and see

Concerning the legislation, which was postponed until next January, McNally said he’s going to wait and see what happens in discussions between Amazon and Gov. Bill Haslam and the state Department of Revenue.

“It puts them in a strong position to negotiate” with Amazon, the state senator said.

David Smith, press secretary for Haslam, had no immediate comment.

An Amazon spokesman could not be reached for comment.

The Alliance for Main Street Fairness called the attorney general’s opinion “encouraging news for the thousands of Tennessee small business owners who don’t want our elected officials to give Amazon special treatment.”

Mike Cohen with the Alliance, a national retailers group based in Arlington, Va., said state government has no business picking winners and losers by giving one company an unfair tax advantage over everyone else doing business in Tennessee.

“Amazon will need to play by the same rules as everyone else doing business in Tennessee,” he said.

But, Amazon policy director Fred Kiga, in late February, told Southeast Tennessee lawmakers that the distribution centers are set up separately from Amazon. They serve as “drop shippers,” providing services to out-of-state retailers that do not have a physical presence in Tennessee, he said.

“The out-of-state retailer still does not have nexus in the state of Tennessee and as a result it is not required to collect sales tax online for Tennessee residents,” Kiga said.

He said Amazon supports the national Streamlined Sales and Use Tax Project, an attempt to streamline states’ sales tax laws and thus persuade Congress to enact legislation permitting states to compel out-of-state vendors to collect taxes.

Matt Kisber, the state’s former chief business recruiter under then-Gov. Phil Bredesen who helped lure Amazon to Southeast Tennessee last year, insists the Internet giant will help the state and its tax coffers.

“I think that the opportunity represented by Amazon is good for Tennessee, especially in the current climate,” he said.

Kisber, who once chaired a nationwide effort to streamline sales tax collections on remote sales, said taxation of Amazon and similar companies “is an issue that needs to be settled on a national level and will never be successfully resolved on a state-by-state level.”

Staff writer Dave Flessner contributed to this report.

about Mike Pare...

Mike Pare, the deputy Business editor at the Chattanooga Times Free Press, has worked at the paper for 27 years. In addition to editing, Mike also writes Business stories and covers Volkswagen, economic development and manufacturing in Chattanooga and the surrounding area. In the past he also has covered higher education. Mike, a native of Fort Lauderdale, Fla., received a bachelor’s degree in communications from Florida Atlantic University. he worked at the Rome News-Tribune before ...

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nucanuck said...

Amazon must need this tax avoidance subsidy to survive. They did threaten to move out-of-state if the concession was not granted.

So should we subsidise Amazon only, or treat all retail shipped goods the same?

June 29, 2011 at 2:19 a.m.
rolando said...

It's ba-a-aack!

Amazon has no nexus here. They sell online only. They have no retail sales centers as do Sears, Penneys, or any other retail chain. SCOTUS has so ruled.

Having a distribution center [read warehouse] here for third-party out-of-state online sales does not create a nexus by Amazon.

So instead of buying online from Amazon's 3rd party outfits [which I seldom if ever do due to price], I simply choose some other out-of-state, sales tax free, sales outlet that ships direct.

Expect to see McNally & Co seek to next impose TN sales taxes on all online sales.

Amazon -- sell your new buildings, get out of Dodge and take your jobs with you. We don' need no steenk'n jobs...just ask McNally. Perhaps it is time for McNally, et al, to watch their jobs disappear next election.

June 29, 2011 at 5:46 a.m.
bpqd said...

Online sales are covered by our state's sales and use tax laws. SCOTUS has ruled in 1932 that our state can decide to tax within its borders as it wants.

When Amazon came to Tennessee, they were promising us jobs. Now that they are here, their online hiring practices and ads directly state, "No extended breaks in employment."

It's a #$%^&* economic depression!

Of course our people were laid off by the hundreds by greedy scum like Amazon. Now, when they show up, under the massive tax break we've given them to get things started, they stab us in the back by saying they will not hire people who desperately need jobs.

To hell with them.

Tax them not only for what they will do, but for what they have already done. We want our millions of dollars in tax breaks back, with interest and punitive damages for defrauding us and lying to get this money. Expunge Amazon's unethical and deceitful business practices from our state permanently.

Disgusting betrayals from Amazon. We give up all we can, and in exchange we receive insults.

Tax Amazon today. They are liars.

June 29, 2011 at 8:17 a.m.
MountainJoe said...

It's not just Amazon. If TN reneges on its agreement not to tax their sales in the state, not only will Amazon pack up and leave, but any other company thinking about locating in TN will choose to go somewhere else instead. It may very well have been a mistake to give them our word that they would not be taxed, but our "leaders" did just that.

June 29, 2011 at 8:33 a.m.
bpqd said...

Other companies come to Tennessee exclusively because our state has unique financial laws about taxation. If a company is owned by a sole proprietor, they will pay the lowest taxes in North America and Europe by locating here. They already know this, that's why they put their offices here.

Stop Amazon job fraud and tax evasion today. Tax them now. They have reneged on their contract with us. Penalize them immediately. Our poor people gave them a six million dollar tax break, and we were betrayed.

Have the revenuers collect back taxes and punitive damages on Amazon's job fraud and tax evasion.

June 29, 2011 at 8:40 a.m.
brokentoe said...

This is how the state of Louisiana became one of the poorest states in the nation. Many companies sought to move to the state to set up shop. Which would have created massive jobs for the state decades ago. However, the businesses wanting to locate in the state had to grease so many politician hands that they decided to scrap the idea and proceeded to move right across the border into the state of Texas. Texas is relatively a booming state, even when the national economy is in recessions.

June 29, 2011 at 10:19 a.m.
bigbearzzz said...

We have some of the absolute dumbest politicians of all time in office right now. Why would they want to strip people of jobs just for sales tax?!?!!? Please people, next election, can we all agree that regardless of what party, we will no longer vote MORONS into office?!?! I cant take much more of this nonsense....

June 29, 2011 at 10:22 a.m.
hambone said...

If SCOTUS has ruled on this that Amazon does not have to pay Tn sales tax because they do not have retail outlet in TN. Then why are they threatening to move out of TN? Why does anyone in Tn think Amazon should have to pay Tn sales tax?

June 29, 2011 at 10:23 a.m.
mrredskin said...

amazon gets a lot less business from me should they decide to collect. many others will do the same. amazon knows this, which is why they will take the distribution centers to other states.

June 29, 2011 at 10:32 a.m.
noapathy said...

Yes, whether you agree on the tax issue or not....they had an agreement and spent a lot of money to have a location here. This will send a very bad message to any other companies interested in our area. It's sad, the greedheads want in everyone's pockets even when it's quite clear what Amazon will do for the economy overall. Keep pushing until we shoot ourselves in the foot!

June 29, 2011 at 10:56 a.m.
wundrwoman30 said...

I haven't wanted to post anything on any board until now. This one has got me all worked up. Amazon is not opening up a retail business in the state .. they are opening up distribution centers. If this passes. Then all the distribution centers in the state has to be charged the same tax for TN customers. I know of four distribution centers in my area. They do not generate income .. just store items that need to be shipped elsewhere.. Some magazines that offer free shipping to its customers will have to charger their customers because they have distribution centers in that state. I say if Amazon can't make a deal with Tennesse bring them to Ga we need the jobs.

June 29, 2011 at 11:31 a.m.
xcergy said...

SCOTUS never said a storefront is the only requirement for nexus. A warehouse or manufacturing facility also meets the standard of physical presence. The AG is correct in this case. TN is still free to make a similar deal as they did here in S.C. re: nexus exemption in exchange of tax perks and promise of new jobs ... just be sure to read the fine print before you do. Make no mistake that Amazon has proven to be a schoolyard bully in dealmaking.

June 29, 2011 at 11:44 a.m.
hcirehttae said...

"Opinion of Tennessee Attorney General Roy Cooper on taxation of Amazon"

The attorney general's name is BOB Cooper, and he's a native Chattanoogan. Perhaps that's something we can all agree on. I thought I'd interject a lone fact into this morass of high-minded opinion...

June 29, 2011 at 12:13 p.m.
bpqd said...

I am glad to see that so many of you agree with me that we should honor our agreement. That is, we should HONOR the REQUIREMENTS OF THE AGREEMENT which include CREATING JOBS, not defrauding our people out of millions of dollars.

This is not a money machine for rich people. It's a tax code in a state that has the word "Commerce" on its seal. It means commerce as a technology to honorably support civilization.

If you would like to know how people get money without civilized commerce, I would encourage you to go to Iraq. Every day I was face to face with people who killed for money. I don't think the rich boys at Amazon would last long under that system. Civilized commerce is about supporting civilization. If you want to steal, go someplace else. We don't need you here.

Six million dollars of tax evasion is no excuse to fail to hire our people because rich people laid them off en masse to make themselves richer.

As Alan Greenspan would say, "The market will take care of the fraudsters." Amazon, enjoy your six million dollar tax bill for breach of contract.

Openly advertising that you want to discriminate against people who are out of work? We are not paying six million dollars for unethical conduct. Criminal financial conduct may be the norm on Wall Street, but it is not accepted here.

No equity improvement? No need for a tax shelter.

If you are not creating anything, then you don't need a six million dollar tax break.

We are mad as hell and we will not be taken for fools.

We are not here to be your suckers. Amazon needs to live up to all six million dollars worth of its tax break agreement. That does not include taking our money and making fools out of us and insulting our unemployed.

Tax Amazon today. Failing to fulfill their half of the agreement is not worth a six million dollar tolerance of job fraud and financial misconduct.

If they can't do what they said, they can either pay like everyone else or get out.

I pay taxes when I do business. Where is my six million dollar payoff for doing nothing but being a disgusting person? We don't need these people ruining our economy with their poor Wall Street style decisions.

Say no to job fraud and tax evasion. Discipline Amazon if they can't act like honorable men for the six million they've taken from our poor with their sham promises.

I hope they all end up long-term unemployed. Then maybe we can send their kids to Iraq for a few years. It would serve them right. Draft the CEO's rich kids today.

Get out of my city.

June 29, 2011 at 1:26 p.m.
bpqd said...

Amazon, Wacker, VW and anyone else who's received a sweetheart tax break deal out to be required to publicly disclose how many veterans, minorities, disabled people, women and long term (over 12 months) unemployed people they've hired or plan to hire for a five year span.

Failure to do business honorably, failure to engage in a respectful dialog with our tax paying citizens, like our long tern unemployed who often spent decades working: it's just not right. We cannot continue to pay these people blindly.

Number of vets employed over there? I predict 0%. No joke.

If they cannot accept our people for who they are, then they don't need to receive multi-million dollar deals letting them get richer while doing it.

Number of minorities, women, or disabled people over there? Far below the population average. The only disabled person employer I've seen in this area, to any significant degree, is the US Post Office.

These people are taking our money, insulting us and our families, and then trying to tell us that they are right. It is not right.

Throw them out of state. If this is their brand of help, we don't need them. There are plenty of poor people for them to insult wherever it is they came from.

Tax Amazon today. Six million dollar tax fraud. Beyond disgusting.

June 29, 2011 at 1:52 p.m.
slimjim300 said...

IDIOTS! they need to wait until amazon has already built the facility and hired people before trying to tax them. what ever happened to tactics?

June 29, 2011 at 2:19 p.m.
rolando said...

Indeed, onachair.

But then, even though our Dictator-In-Chief plainly told everyone what he stood for and what he planned to do well ahead of the election, too few people took him seriously. Wait until he destroys our coal industry and eliminates 45% of our energy producing capacity. That might get their attention.

McNally and Co are simply following in Dear Leader's footsteps.

However, we must realize that neither of the sponsors of the bill have more than half a dog in this fight -- neither District will gain employees but they will gain taxes. They are more than willing to throw those new jobs out the window just for a few bucks and to H with the workers. Typical politicians.

June 29, 2011 at 4:54 p.m.
rolando said...

bpqd -- A funny-peculiar thing happened with many national chain stores during the last Depression; they instituted a policy that any woman who married a working man would lose her job...which would be given to an unmarried woman.

Point? Being in-need is a variable thing...some are more in need than others.

Besides, what does the hiring of minorities, women, or the disabled have to do with anything? Unless I am mistaken, there are laws against that sort of thing.

You would apparently have VW, et al, hire unqualified workers who would produce poor quality goods over those who are more qualified/experienced...and that applies across the board and excludes favoritism/preferential treatment for any reason other than qualifications for the job.

June 29, 2011 at 5:09 p.m.
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