NASHVILLE—Gov. Bill Haslam said Thursday he continues to back the Bredesen administration’s commitment to Amazon that the company will not be required to collect state sales taxes despite locating two distribution centers in Southeast Tennessee.
But the governor was less than clear about how he intends to deal with legislation sponsored by two powerful Republican lawmakers, whose amended bill would require Internet retailer Amazon to collect sales taxes on items it sells to Tennessee customers.
“I’ve actually just got the legislation this morning,” Haslam told reporters. “As I understand it, the attorney general is looking at that [constitutionality] as well. So I’ll probably wait to see what he says before we do it [weigh in].
“Obviously the state does have a commitment to Amazon.”
On Wednesday, Amazon’s vice president for public policy, Paul Misener, said legislative efforts to require the Internet retailer to collect sales taxes on purchases made by Tennessee-based customers are unconstitutional. If approved, he warned, it could cause the company to abandon the centers it is building in Hamilton and Bradley counties.
Amazon is spending $139 million to construct the two centers, which have highly automated “pick, pack and ship processes” for fullfilling orders of goods sold by both Amazon and third-party sellers.
The centers are expected to employ some 1,400 to 1,500 full-time workers and several thousand part-time and seasonal workers.
Under U.S. Supreme Court rulings, states cannot compel out-of-state retailers to collect sales taxes from in-state customers unless they have physical presence or “nexus.”
Amazon officials say the centers create no physical presence in terms of retail, noting the centers do not take orders and Tennessee customers cannot pick up items or return them there.
Senate Finance Committee Chairman Randy McNally, R-Oak Ridge, and House Finance Committee Chairman Charles Sargent, R-Franklin, have legislation they say would make it clear the two distribution centers Amazon is building in Hamilton and Bradley constitute “nexus.”
Tennessee’s Revenue Department under both former Gov. Phil Bredesen and now Haslam have steadfastly refused to discuss or produce specifics of the agreement that was made with Amazon, citing state secrecy laws safeguarding taxpayer information.
“People that have nexus in Tennessee are supposed to pay sales tax,” said McNally, who has characterized Amazon’s warnings about abandoning Tennessee as “blackmail.”
Sargent, the House sponsor, shrugged off the possibility Amazon might pack up and go, saying, “I’m looking at legislation that is constitutional and would not affect just one company.”
Haslam and Amazon officials say the issue of Internet taxation is something Congress must address, not the states.
Lawmakers from Hamilton and Bradley counties are defending Amazon. Rep. Kevin Brooks, R-Cleveland, said the “gist” of the situation is honoring previous commitments.
The legislation from McNally and Sargent is fine if it’s in effect only from 2012 onward, after Amazon has opened its center, he said.
“But I don’t want the legislation to affect anything we’ve done in the past,” he said.
Legislative analysts estimate that Tennessee government would reap an additional $7.9 million a year under the legislation while local governments would see about $2.7 million.
Tennesseans for Tax Fairness, an independent group critical of the Amazon deal, estimates the state is losing some $30 million to $35 million in tax revenue because Amazon does not require Tennesseans to pay sales taxes on the items it sells.
Rep. Eric Watson, R-Cleveland, said critics should have raised their concerns earlier.
“Why pull this stunt after the fact that Amazon has already started building in Bradley County?” he asked. “It makes no sense to me at all.”
Rep. Vince Dean, R-East Ridge, said, “I think it’s extremely important we honor our previous commitments. Going forward, it may be something that should possibly be open for discussion. But I think it’s extremely important that we keep our word.”
Andy Sher is a Nashville-based staff writer covering Tennessee state government and politics for the Times Free Press. A Washington correspondent from 1999-2005 for the Times Free Press, Andy previously headed up state Capitol coverage for The Chattanooga Times, worked as a state Capitol reporter for The Nashville Banner and was a contributor to The Tennessee Journal, among other publications. Andy worked for 17 years at The Chattanooga Times covering police, health care, county government, ...
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