Defusing one of the hottest controversies in the legislature, a state House leader announced Wednesday he is dropping his attempt this session to compel Amazon to collect sales taxes from Tennessee customers.
House Finance Committee Chairman Charles Sargent urged Amazon “to do the right thing” by voluntarily charging and collecting the tax. If the Internet retail giant refuses, he said he will bring back his legislation in 2012’s session.
“Exempting Amazon from our sales tax is unfair to our existing businesses, who are then at a disadvantage, and it’s unfair to the citizens of our state,” said Sargent, R-Franklin.
Amazon is spending $140 million to build two distribution centers in southeast Tennessee — one in Chattanooga and the other in Bradley County. The company would hire 1,500 full-time workers and several thousand people at Christmas. Amazon also has talked about building three more warehouses in Tennessee, possibly one of them in Nashville.
Under U.S. Supreme Court rulings, a state cannot force out-of-state retailers to charge sales taxes unless those companies have a physical presence in that state.
Sargent’s bill would establish that Amazon’s warehouses will constitute sufficient physical presence to compel the company to charge and collect sales taxes on merchandise sold to Tennessee customers.
Amazon argues its warehouses, which process orders and ship merchandise, are separate from the company’s retail business. The company maintains the Bredesen administration, in its last days, agreed not to force Amazon to charge the sales tax in return for locating the warehouses in Tennessee. But the agreement apparently was informal and no documentation has been produced. In remarks to the Senate Finance Budget Subcommittee, Sargent referred to the agreement as “the alleged deal.”
By next year, he said, he hopes “Amazon might be doing the right thing and collecting and filing the tax. I believe they should and hope they are. If not, we will address that next session. In the meantime, Amazon, you have the opportunity to show you are ready to do the right thing.”
“Tennessee is a great place,” he added. “We want to welcome you here but we need you to understand that the Volunteer State will treat everyone fairly.”
House Republican leader Gerald McCormick, who represents Chattanooga, disagreed with Sargent. McCormick said it’s important for economic growth for Tennessee to follow through on agreements with businesses.
“We absolutely must keep our word and go through on the commitments we have made when we bring companies in here and they build facilities and hire Tennesseans,” McCormick said. “If we don’t do that, it will affect future economic development projects. Other states will be gleefully pointing out that we don’t keep our word. I hope we spend our time creating jobs instead of discouraging business and investment in Tennessee.
“Certainly, we will be ready next year to fight this. It’s not good legislation. It’s not good public policy.”