Retailers not completely satisfied with Amazon sales tax deal

Authored By Chloé Morrison

State leaders have reached an agreement with Amazon officials about the issue of collecting sales tax, but retailers aren’t totally satisfied with the deal.

“It’s not a good thing for Tennessee retailers,” Mike Cohen, spokesman for the Alliance for Main Street Fairness, said Thursday. “It’s too long a period before Amazon begins to pay.”

Don’t misunderstand Cohen – his organization is happy to have Amazon in Tennessee providing jobs, he said.

But he wants a “level playing field.”

He said that the timeline – Amazon agreed to start collecting sales tax on January 1, 2014 – gives Amazon three holiday seasons, which are “huge” for retailers.

It’s a large disadvantage for brick-and-mortar retailers who must collect sales tax, Cohen said.

“There’s nothing wrong with any retailer having an advantage if there is something they develop and it’s smart business,” he said. “The issue is the government shouldn’t be giving the advantage.”

California recently reached a similar agreement with Amazon, but the online retailer will only exist for about one year before collecting tax.

Some Tennessee retailers wanted a deal more like the one in California, leaders said.

South Carolina leaders also recently reached a deal that gives Amazon five years before collecting sales tax.

“The reality is that California is about one-seventh of the country’s population,” McCormick said. “It’s probably a lot harder for Amazon to walk away from California than it is Tennessee. So, two years is certainly better than five years that South Carolina agreed to. (Retailers) would rather have zero years, but two years is better than never.”

One local resident said that avoiding sales tax does make Amazon attractive and the change will impact his shopping habits.

“I buy weekly from Amazon now (and) will likely shop locally more often when sales tax kicks in,” Christopher Fason said via Twitter.

More local jobs announced

As local leaders, including state Rep. Gerald McCormick, Chattanooga Mayor Ron Littlefield and Hamilton County Mayor Jim Coppinger, announced the news in Chattanooga Thursday, Gov. Bill Haslam made a similar announcement in Nashville. 

Leaders also said the deal means more jobs for Tennessee.

The new Amazon commitment means 2,000 more full-time jobs than originally announced.

“We are proud that this worldwide brand has chosen to make a significant investment in
Tennessee and is committed to expanding its presence here,” Haslam said in a prepared statement. “This agreement balances meeting the needs of the company and the needs of the state by providing certainty to Amazon and brick and mortar retailers in Tennessee regarding sales tax.”

The total investment in Tennessee will be $350 million, leaders said.

The new jobs will be divided between Hamilton, Bradley and Wilson counties so it is unclear exactly how many jobs will come to Southeast Tennessee, but it will be hundreds, possibly near 1,000, McCormick said.

After breaking ground on its two fulfillment centers in Bradley and Hamilton counties 10 months ago, Amazon has already hired 1,500 employees and completed construction on both facilities.

The deal does require legislation, which has not yet been drafted, McCormick said. He expects it to pass in the state House and Senate.

Currently, Tennessee law requires that consumers pay use tax to the Tennessee Department of Revenue when making an online purchase from any retailer that does not collect sales tax.

McCormick said many customers do not actually pay the tax to the department of revenue.

After 2013, responsibility for collecting and remitting the Tennessee tax will shift to the company.

In the event that the U.S. Congress acts before January 1, 2014, all online retailers will collect sales tax at the time federal legislation is enacted.

Chattanooga leaders said that the deal means local citizens can stop wondering if the deal might fall through.

“Amazon is here, here to stay for a long, long time we hope,” Coppinger said.

Moving forward, the challenge is to “keep up with infrastructure needs” at the Enterprise South location, Littlefield said.

He’s confident local leaders can do that.

Tennessee democrats could not be reached for comment, but Sen. Andy Berke tweeted that he is pleased with the deal.

Federal legislation?

Local and state leaders have said they want federal legislation to address the issue of online sales tax collection.

Paul Misener, Amazon vice president for global public policy, said in a prepared statement that the company supports federal regulations regarding sales tax for online retailers. 

“We’re committed to working with Tennessee and Congress to pass federal legislation as soon as possible and, as analysts have noted, we’ll continue to offer customers the best prices, regardless of whether sales tax is charged,” he said in a prepared statement.

The one thing all parties seem to agree on is that federal legislation needs to address the issue to prevent giving states that won’t make Amazon collect sales tax an advantage.

Next week, Cohen and merchants from Tennessee are going to Washington, D.C., to discuss the issue.

“We are absolutely pursuing a federal solution,” he said.

U.S. Rep. Chuck Fleischmann, whose district includes two of the three Tennessee Amazon facilities, is pleased with the deal, according to Jordan Powell, the congressman’s press secretary.

Fleischmann met with Haslam in August to discuss the issue.

Powell said Fleischmann will consider the possibility of federal legislation later.

“That’s probably a few years down the road,” he said. “Chuck’s just happy, and applauds the state and local leaders for creating a solution that works best at their level.”

A spokeswoman for Sen. Bob Corker, R-Tennessee, said Corker commends the governor for reaching this conclusion.

“In terms of a federal response to the issue of states collecting sales tax from online retailers, he knows it’s a problem that requires a thoughtful solution and has said he believes it will eventually be resolved at a federal level,” spokeswoman Laura Herzog said via email. 

James Harrison contributed to this story.