Deal With Amazon Leaves Tennessee Businesses at Competitive Disadvantage

Tennessee has become the latest state to negotiate an agreement with Amazon.com that would postpone the date by which the online retailer must collect state sales tax.

 On Thursday, October 6,  Tennessee Gov. Bill Haslam announced a preliminary agreement with Amazon.com under which the retailer will begin collecting state sales tax beginning January 1, 2014, “absent federal action” in formulating a national solution for sales tax equity, as reported by the Chattanooga Times Free Press [1]. Last month, California Gov. Jerry Brown signed legislation that will require Amazon to begin collecting and remitting sales tax [2] to the state beginning September 15, 2012, unless federal sales tax fairness legislation is passed before then.  

Amazon has said it will invest $350 million in Tennessee, where it plans to construct three distribution centers and hire 2,000 full-time workers. A recent economic impact study commissioned by the Alliance for Main Street Fairness (AMSF) found the annual losses in Tennessee from the lack of online sales tax collection from companies, including Amazon, totaled almost 7,000 jobs and more than $400 million in tax revenue.

Regarding the proposed agreement, ABA CEO Oren Teicher said, “The actions taken in Tennessee are incredibly disappointing.” Noting that the Tennessee deal continues to give Amazon inequitable special treatment in regard to sales tax collection for three additional shopping seasons, Teicher said, “Amazon.com should be collecting state sales tax today, not in 2014. We strongly urge the Tennessee Department of Revenue to fairly enforce the sales tax laws of Tennessee by requiring Amazon.com to collect and remit sales tax.”

Gov. Haslam’s announcement comes just three days after Tennessee’s Office of the Attorney General issued a second opinion in favor of sales tax fairness, which found that the state cannot “contractually waive a taxpayer’s obligation to pay sales taxes” when the seller has nexus in the state.

Mike Cohen, spokesperson for the Alliance for Main Street Fairness in Tennessee, noted that the proposed deal will require legislative approval, action that is not expected until 2012. If Amazon opens its facility this year, AMSF noted that it remains unclear how the online giant could operate without collecting sales taxes given the latest opinion from the Attorney General.

“If Amazon can agree to start collecting the sales tax in one year in California, why should we have to wait one day longer in Tennessee,” said AMSF’s Cohen. “How many Tennessee jobs are lost, how many Tennessee businesses will close because the state grants Amazon a huge price advantage by not having to charge sales taxes?”