published Friday, May 20th, 2011

Amazon — jobs or taxes?

Internet retailer Amazon.com happily proposes to hire 1,200 full-time workers and 2,000 part-time or seasonal employees in Chattanooga and nearby Bradley County. Amazon also has indicated interest in having order fulfillment centers in Nashville and Knoxville.

That raises the job potential for Tennesseans to 3,000 full-time and 4,000 seasonal positions, involving an investment of $300 million.

So it is good news that Tennessee legislators have smoothed the way by abandoning — at least for now — problematic plans to impose sales taxes on orders to Amazon.

The company’s argument is that the facilities being built here are distribution centers and don’t constitute a traditional retail presence that would trigger sales tax collections.

The issue is important, because insistence upon sales tax collections had threatened to cause Amazon to take its centers somewhere else.

Do we want thousands of jobs and hundreds of millions of dollars invested in Amazon’s Tennessee operations, in accord with the company’s plan to fulfill orders without collecting a sales tax in Tennessee — or don’t we?

It appears that we do, and the result of that will be more jobs for Tennesseans.

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EaTn said...

Internet retailers and our antiquated sales-tax system is like hitching a sports car to a buggy. If our state plans to attract 21st century jobs they better upgrade the 19th century legislation to one that can think past guns and protecting wealth.

May 20, 2011 at 7:17 a.m.

The question is not "jobs or taxes?" Amazon has made it pretty clear: if the state reneges on the agreement, there will be neither.

May 20, 2011 at 9:22 a.m.
nucanuck said...

The Amazon deal is done. Now the Tennessee legislature will need to deal with fairness to existing in-state retailers.

Many of our retailers market on-line...Sears,Best Buy,JC Penney,Walmart...the list is long. Tennesseans going on-line to shop will pay sales tax on all merchandise from those stores, but can avoid the tax by simply selecting Amazon,or an out-of-state retailers with no in-state operation. Clearly that is an enormous advantage for any retailer who can avoid collecting the tax.

By giving Amazon a special status, the State has opened the legal door for existing merchants to seek equal treatment under the law. The courts would almost certainly rule for the State to treat all merchants the same, meaning, at the least, on-line sales by in-state merchants would no longer have to collect sales tax on those sales.

That would give on-line sales a big boost and reduce State sales tax, probably rapidly.

The State has undermined their own financial foundation and may now have to seek other methods of taxation to fund State operations.

So we welcome Amazon and we sit back to see how our wizards in Nashville will navigate the legal mudslide that they have created.

May 20, 2011 at 9:33 a.m.
nucanuck said...

The Tennessee State Legislature has made it official...anybody who buys a big ticket item at the Mall is a dummie. Buy on-line, save the tax and probably get free shipping to your door.

Last year I bought four major items from Tiger Direct with no sales tax collected, and shipped free.

Bye bye, Mall stores.

May 20, 2011 at 10:43 a.m.
sage1 said...

There is a difference with online purchasing from Sears, Walmart, Target ect.....and Amazon. That is, if I understand the Amazon situation correctly. Maybe I don't. As I understand this issue, Amazon fulfilment centers are shipping locations ONLY. No retail store front in Tennessee where you can go to make a face to face purchase and pay as you do at the other stores. You are REQUIRED to order online and pay for shipping from Amazon. Yes you can order online from Sears, Walmart and Target, but they hold a bit of an advantage on shipping. In store pickup makes use of the stores own delivery trucks and daily schedules that deliver your item to the store if you want. This can be done instead of having items shipped to your door via UPS, Fed-Ex, or USPS at a considerable savings on shipping. This is a lot less than the shipping from Amazon that depends on shippers mentioned due to no retail Amazon storefronts. Regardless which way you look at it, there simply is NO level playing field on this issue.

May 20, 2011 at 11:13 a.m.
nucanuck said...

sage1,

Yes, there is a difference in that Amazon takes and ships on-line orders only, but why should that entitle only them to be excluded from tax collection? Why shouldn't any business selling on-line get the same deal?

As to delivery, almost all retailers charge for the service. On-liners often absorb the cost of shipping to widen their price advantage and since they don't have expensive stores to maintain, delivery becomes a small expense to lock in the sale.

On-line shopping is on the rise and that may or may not be a good thing. The important thing is Tennessee should offer the same terms to all for the same service provided. If the State leaves existing retail at a disadvantage we will actually begin to LOSE retail jobs as more of us do the logical thing and order on-line.

The problem is the State's tax structure no longer fits the emerging retail model.

May 20, 2011 at 12:09 p.m.
sage1 said...

As to delivery, almost all retailers charge for the service

Actually what you're saying is not always true. Many online purchases can be made at Sears and Walmart to name just two, and be picked up at the store for free after the item is delivered. I've done it many times and on large items (Trolling Motor and a Shotgun from Walmart for instance) with no shipping at all. I just had to wait a week or so for the item to arrive at the store via their trucks. Another that comes to mind is Best Buy. Even when you do pay shipping to these true retailers, it's much less than what you pay for Amazon to ship. I'd say to be fair then, Amazon should have to collect taxes, and online purchases from local retailers should be required to ship via UPS, Fed-Ex etc.....to your door with no in store pickups allowed. That should make everything hunky dory to everybody. Besides we want to be fair to the shipping companies too....Right?

May 20, 2011 at 12:59 p.m.
EaTn said...

My guess is that big businesses like those mentioned that expect their internet sales to grow even more aren't going to have their hands tied without a fight--would you? Any fool would order from a tax free site over a taxed site with all else being equal. What happened to to right-wing supporting small businesses? Many of them are already losing to internet sales. It's short sighted for any state to depend primarily on sales tax revenue in this high-tech environment.

May 20, 2011 at 1:43 p.m.
nucanuck said...

sage1,

How is picking up an ordered item at a store "free delivery"? You still have to transport the item to your home or pay the retailer to do so.

The point you may be missing is that the US Supreme Court has ruled in favor of out-of-state on-line retail not being required to collect sales tax. That has opened the door to an attack on the retail sales tax structure nationwide. That's what this whole Amazon thing is about. Tennessee, and all states that rely on a sales tax, are going to slowly lose their sales tax base and have to find other taxes to take up the slack.

Would Amazon and the on-line retail sector be as successful if they didn't have a price advantage? Maybe. They might still have lower overhead,giving them a bit of a cost advantage, but they wouldn't have the "hands on" advantage of local retail.

The bottom line is that government's job should be to create a "fair to all" environment and then let competition settle the rest. Tax advantages for some simply are not fair and the only avenue the state has to make them fair is by removing the sales tax on all on-line sales from all retailers. That,of course,creates a revenue problem.

May 20, 2011 at 1:46 p.m.
nucanuck said...

EaTn,

You nailed it!

May 20, 2011 at 1:48 p.m.
hambone said...

The biggest complainer is Walmart. I can't see Amazon hurting Walmart's bottom line very much.

May 20, 2011 at 1:59 p.m.
chrisbrooks said...

"Long-term unemployment, millions of foreclosures, crippling personal debt and bankruptcies, the evaporation of savings and retirement accounts, and the crumbling of the country's infrastructure are taking place as billions in taxpayer subsidies, obscene profits, bonuses, and compensation are doled out to corporate overlords. The drug and health-insurance companies, subsidized with billions in taxpayer funds, will soon legally force us to buy their defective products while remaining free to raise co-payments and premiums, especially if we get seriously ill. The oil, gas, coal and nuclear power companies have made a mockery of Barack Obama's promises to promote clean, renewable energy. We are rapidly becoming a third-world country, cannibalized by corporations, with two-thirds of the population facing severe financial difficulty and poverty." - Chris Hedges

While we subsidize multi-national corporations like Amazon and VW with hundreds of millions of tax-payer dollars our schools are being de-regulated and privatized. Welcome to the Corporate States of America, where everything is for sale and nothing is sacred.

May 20, 2011 at 2:30 p.m.
nucanuck said...

hambone, are you OK with preferential treatment for one type of retail over another? How is that different from a subsidy of sorts?

Amazon and others are building these distribution centers,not to enlarge the retail pie, but to rip business away from traditional retail, which will actually kill jobs over the long haul. Let them win or lose a fair fight, but government shouldn't grease their skid,IMO.

May 20, 2011 at 2:32 p.m.
hambone said...

While I have used a computer and been on line for 14 years, I have yet to buy anything from Amazon. And I dare say that I am not in the minority. I can go to one of 4 Walmart super stores within 20 miles of home. I just don't think that Amazon not collecting sales tax is a big deal. If you want a level playing field then you are talking about state income tax. And we all know how well that will go over.

May 20, 2011 at 3:26 p.m.
nucanuck said...

Last year alone, I saved hundreds of sales tax dollars buying on-line. I agree the percentages of on-line sales are small now, but no one knows better than Amazon,how fast that is changing.

And why is Walmart crying? They know that no sales tax is a huge advantage that will cut into their bottom line if it is extended to some,not all. Every B&M retailer will suffer over time.

Tennessee didn't create this problem, but Tennessee has a chance to lead in solving this problem.

May 20, 2011 at 3:49 p.m.
nucanuck said...

Where are all the tax fairness folks?

May 20, 2011 at 3:53 p.m.
LibDem said...

The tax is due on purchases. We're just talking about convenient ways to break the law. In a 'who has the bigger pair' face off between Amazon and the State Legislature, you gotta know who wins.

May 20, 2011 at 5:35 p.m.
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