Amazon sales tax debate ongoing

Authored By Chloé Morrison

Discussions are ongoing between Amazon and state officials, and state Rep. Gerald McCormick, R-Chattanooga, said Thursday that “believe it or not” the online retailer wants to collect sales tax.

“They want to do it in a way that doesn’t put them at a competitive disadvantage,” he said.

A new proposal from Democratic members of Congress would require sales tax collection in all states regardless of the seller’s location, eliminating competition between states aiming to attract business from companies, such as Amazon.  

McCormick also said that he thinks eventually Amazon will collect sales tax in Tennessee, but that, for now, state lawmakers must keep the commitment in the original deal not to require sales tax collection.

“I want to reassure the people that are applying for jobs with Amazon – they are going to be a long-time employer with Hamilton and Bradley counties,” he said. “We are actively working with them and they are interested in working with us.”

Background
In December 2010, Gov. Phil Bredesen announced that Amazon would establish two fulfillment centers in Tennessee – one at Chattanooga’s Enterprise South Industrial Park and the other in Bradley County.

The plan includes a $139 million investment in the two new facilities.

When officials announced the deal in 2010 they estimated that it would provide up to 1,400 permanent jobs and hundreds of more seasonal positions.

Amazon officials recently announced that they started to hire full-time employees in Hamilton and Bradley counties in preparation for the facilities’ expected opening in fall 2011.  

In May, state leaders, Senate Finance Committee Chairman Randy McNally, R-Oak Ridge, and House Finance Committee member Rep. Charles Sargent, R-Franklin, began exploring efforts to require Amazon to charge sales tax, which was not part of the initial agreement.

That effort prompted discussion and push back from some local leaders and residents, who said that Amazon would pull out of the deal with Tennessee if required to collect sales tax, resulting in a loss of jobs for the area.

“The only thing that would make them pull out of Bradley and Hamilton counties would be if the legislature would come in next year and force them to collect sales tax right away,” McCormick said Thursday. “I do not believe that is going to happen.”

The Main Street Fairness Act
Members of Congress recently introduced a bill – the Main Street Fairness Act – which would require online retailers, such as Amazon, to collect sales tax just as brick-and-mortar stores do.

Amazon has written a letter in support of the act, which U.S. Sen. Dick Durbin, D-Ill., and U.S. Reps. John Conyers, D-Mich., and Peter Welch, D-Vt., introduced on July 29.

Both House and Senate versions of the legislation have been referred to committees.

A spokesperson with Durbin’s office said there isn’t a timeline for the legislation and representatives didn’t return a call seeking more information about support for the proposal.

McCormick said Thursday that he supports making the competition between states fair.

“We really need federal legislation to make sure it happens in all 50 states,” he said.

Amazon is on board, some organizations voice opposition 
In a letter to Durbin, Amazon Vice President for Global Public Policy Paul Misener said his company supports the sales tax legislation.

“Amazon.com has long supported a simple, nationwide system of state and local sales tax collection, evenhandedly applied to all sellers, no matter their business model, location, or level of remote sales,” he said.

Chattanooga resident Bradley Chambers said that he has strong feelings on the issue and that Tennessee needs to stick to the original deal and not risk losing jobs that the state “needs more than anything right now.”

“The tax issue needs to be solved on a federal level,” he said via email. “I agree that it’s not fair to local retailers for Internet retailers to get to skirt the issue in the majority of states. It’s also unfair to the states for it being a bargaining chip in negotiations with businesses. Some states are in worse financial situations than others and having to give up sales tax revenue makes it even worse.”

But some nonprofit organizations, such as the Computer & Communications Industry Association and the National Taxpayers Union have voiced opposition to the proposal in Congress.

“We were told that ‘tax-free shopping’ was costing states enormous sums, even though businesses and customers involved in online transactions pay many levies such as property, profit, payroll, and fuel taxes,” National Taxpayers Union Executive Vice President Pete Sepp said in a prepared statement. “Additionally, many Internet purchases are already subjected to sales taxes.”

Computer & Communications Industry Association President and CEO Ed Black said the proposed legislation doesn’t create a more equitable situation.

“Penalizing business for utilizing technology and innovation is not fairness, but merely a shortsighted targeting of new revenue models, while protecting existing business models at the expense of consumers and growth,” he said in a prepared statement.

Some local residents said that a lack of sales tax isn’t the main draw of Amazon.

Chambers said his family buys diapers from Amazon and sets them for auto-delivery every two months.

Yes, it is cheaper than Wal-Mart, he said. But the main reason is that it is one less thing for him to worry about.

“People like buying on Amazon.com because it’s generally less expensive and it’s convenient,” he said.