published Tuesday, May 10th, 2011

Legislators press sales-tax issue with Amazon official

Senate Finance Committee members peppered an Amazon official today with questions about a secret sales-tax exemption agreement state officials struck to persuade the company to build two distribution centers in Southeast Tennessee.

The Internet retailing giant also came under fire in Nashville from traditional brick-and-mortar retailers who asserted it was unfair to let Amazon avoid charging state sales taxes to its in-state customers while they continue to be required to collect the taxes.

Finance Committee Chairman Randy McNally, R-Oak Ridge, who has a bill that seeks to force Amazon to collect sales taxes, asked the company’s director of state policy, Braden Cox, whether the previous Bredesen administration “made a commitment in order to get Amazon into Tennessee?”

Cox said Amazon officials had negotiated with state officials “as you know and there were commitments made.”

“I guess I just don’t know the legal nature of them,” said Cox, noting he was not involved. “Whether they’re actually something that can be upheld in state court. I don’t know that. But I know they were made in a business context, an inducement for us to want to come to Tennessee.”

In response to more questions, Cox said “it was a decision that was negotiated in more of a business-type context” between a state economic development leader” and “also people at our company on the business side.”

Sen. Brian Kelsey, R-Germantown, questioned whether it was “more of a handshake deal” than a legal written contract.

Replied Cox: “To the extent that a handshake deal matters — and I think they should — yes.”

He said he would check with his bosses at Amazon to see if the company can release whatever agreement was struck.

John Lyell, a Nashville attorney and contract lobbyist who has been retained by Amazon, told lawmakers that “a deal is a deal — if one party goes out relying on that deal and expends funds digging a hole to start building or moving then it’s a little late.”

Amazon is spending $139 million to construct two fulfillment centers — one in Hamilton County, the other in Bradley County — that will employ an estimated 1,400 to 1,500 full-time employees and several thousand more part-time workers.

Action on McNally’s legislation was delayed until next week. Earlier, Lyell questioned the constitutionality of McNally’s legislation in light of prior U.S. Supreme Court rulings that states can’t compel out-of-state retailers to collect sales taxes from in-state customers unless they have physical presence such as a store or, in legal jargon, a “nexus.”

Amazon says its Internet sales will not be handled in Tennessee. Its distribution or “fulfillment centers, where orders are processed and merchandise shipped, are “separate and apart” from its retail business, company officials have said.

about Andy Sher...

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, ...

Comments do not represent the opinions of the Chattanooga Times Free Press, nor does it review every comment. Profanities, slurs and libelous remarks are prohibited. For more information you can view our Terms & Conditions and/or Ethics policy.
patriot1 said...

The most important ways in which I think the Internet will affect the big issue is that it will make it more difficult fot the government to collect taxes. - Milton Friedman

May 10, 2011 at 2:03 p.m.
nucanuck said...

So, according to Amazon's interpretation of the law, warehouses do not constitute a physical presence in the State. Hmmm. And why don't people think much of lawyers?

May 10, 2011 at 2:06 p.m.
jrandallsexton said...

Perhaps some people, including the our legislators, are missing the bigger picture. If TN keeps pressing this, then Amazon will just pack their bags head for another state. TN will still not be capturing sales taxes on Amazon purchases at that point either. It's a lose-lose situation (in terms of sales tax) for the State. Take the jobs and the benefits to the affected areas, give thanks to God for Amazon coming, and move on to some other issue ...

... and ...

This is to say nothing of the precedent that TN is making for itself with future business dealings.

May 10, 2011 at 2:59 p.m.
nvanallen said...

nucannuck you do realize that amazon just passes their taxes along to the consumer. They are NOT going to have a brick and mortar retail store...they are just a distributor. wake up

May 10, 2011 at 3:03 p.m.
ninjapirate said...

" If TN keeps pressing this, then Amazon will just pack their bags head for another state. "

What other state? They can't go to Kentucky, North Carolina, South Carolina, Arkansas, and probably Missouri... and they built a big warehouse in Georgia 10 years ago and ended up closing it down 2 years later.

<p> and are two large internet retailers that collect taxes in Tennessee... they should get the same deal as Amazon whatever it is.

Personally I think there should be a 1-2% warehouse to home sales tax for companies that have nexus in Tennessee.

This should never happen: Barnes & Noble's $259 Nook costs more than Amazon's $279 Kindle. Why? Tax.

See also: Accuses Barnes & Noble of Tax Avoidance(not charging sales tax when they have brick and mortar stores)

May 10, 2011 at 5:40 p.m.
kk1217 said...

Someone please explain to me how it is any different than Walmart? If you order something online and have it delivered to a local store....say do NOT have to pay Sales Tax...hmmm Just a thought!!

May 11, 2011 at 9:29 a.m.
xcergy said...

So, a handshake is now a legal contract when it involves a million(s) dollar deal. ..... Right!

May 11, 2011 at 11:48 a.m.
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