State senators are debating whether to balk at a secret deal with Amazon under which the Internet retail giant could operate warehouses in Tennessee without making its online customers pay the state sales tax.
The Senate Finance Committee heard testimony Tuesday on legislation aimed at forcing Amazon to collect the sales tax, despite last year’s agreement with the Bredesen administration. The committee postponed voting on the bill until next week.
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, or nexus, in that state.
Senate Finance Committee chairman Randy McNally, R-Oak Ridge, said his 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. “Unless you have retail store in the state, then you’re not required to pay the sales tax,” Amazon lobbyist John Lyle told the committee.
Representatives of AutoZone and Best Buy testified it is unfair to let Amazon do business without collecting the sales tax.
With 157 stores in Tennessee and 4,000 employees, AutoZone collected $19 million in state sales taxes last year, the company’s Brian Campbell said.
“An equal playing field is all we’re asking for,” he said. “The state should not be in the business of picking winners and losers, cutting secret deals to give one entity an advantage over another. If this deal is as it is portrayed, it will be millions and eventually billions of dollars in lost revenue over time.”
Lyle said he understands “the frustration” of other retailers, but he added: “I know every one of them has a retail store located in this state. Amazon doesn’t.”
Senators expressed irritation about the deal cut in the waning days of the Bredesen administration to bring Amazon to Tennessee. Whatever arrangement was made has never been made public.
McNally asked Braden Cox, Amazon’s director of state public policy, whether the deal exists.
“We have talked with the previous administration and there were commitments made,” Cox acknowledged. “I can’t speak to the legal nature of those commitments in Tennessee, but they were commitments made to the company that there would be an effort made to provide some certainty to the sales tax collection issue based on building these distribution centers here in Tennessee.”
Sen. Bill Ketron, R-Murfreesboro, said, “Was this deal just cut with the governor? Was there any guarantee that the legislature would support this? I’d like to have an answer to that. We come in in January and, bang, here it is. I have a real issue with the legislature being circumvented in any process where we’re obligated to spend money.”