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VOL. 126 | NO. 198 | Tuesday, October 11, 2011

Amazon.com Deal Changes Incentives for Company

By Bill Dries

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The first tip last week that the latest jobs announcement by Tennessee Gov. Bill Haslam would be a little different was that he did it in the old Tennessee Supreme Court chambers in Nashville.

The chambers are usually the setting for announcements of statewide importance with a broad political impact and sometimes a new direction for state government.

Haslam announced an agreement with Amazon.com Inc. to begin collecting and paying state sales tax on items it sells online to consumers in the state.

And Amazon.com, which had already committed to building distribution centers in three other cities, is expanding its investment to $350 million and the creation of 3,500 full-time jobs instead of the 1,200 in the initial decision.

The new decision is an expansion of the original jobs announcement. But it is also a significant change in the incentives given Amazon.com by then Gov. Phil Bredesen to get the first three distribution centers in Cleveland, Chattanooga and Lebanon and their 1,200 jobs.

The deal with the state then was that Amazon.com had an indefinite waiver on collecting state sales taxes.

And Tennessee got bricks and mortar in the state from Amazon.com.

Under the new terms, which go to the Tennessee Legislature next year for approval, Amazon.com is to begin collecting the tax in 2014. The company and Haslam say they hope a national sales tax will be in place by then or before. If it happens, whenever it happens, corporations would be responsible for adding the tax to a consumer’s bill and collecting it.

In the Thursday, Oct. 6, announcement, Haslam and Paul Misner, Amazon.com vice president, referred to it as a “national solution.”

In Memphis the next day, Haslam came out and said the “T” word.

“We took a situation where Tennessee wasn’t slated to have Amazon collecting sales tax forever and made it so now they’ve agreed to collect in two years and basically double the number of jobs they’re bringing into Tennessee,” Haslam said. “Amazon really wants there to be a national sales tax. That’s the ultimate answer. Of all the Internet sales tax that aren’t being collected, Amazon is just 5 or 10 percent of it. There’s a whole lot of other folks who aren’t collecting that either.”

And there are other states where the missing revenue stream has become an issue. Before last week’s announcement in Nashville, Amazon.com agreed to similar terms in South Carolina and California.

“The sales tax issue must be resolved in Congress,” Misner said. “It’s the only way the state of Tennessee will be able to obtain all of the sales tax revenue that can be collected for the state.”

The controversy over sales tax on items from outside the state that never pass through a bricks and mortar store in the state goes back at least to the McWherter administration and a time before the Internet when mail order sales by firms without a storefront presence in the state became the issue.

The solution was a state law requiring Tennessee consumers to pay a “use tax” to the state, which puts the onus for collecting the tax on the state.

“Let me be clear, this isn’t about new taxes,” Haslam said. “This is about how we collect sales tax in Tennessee.”

The Republican leaders of the Tennessee House and Senate, House Speaker Beth Harwell and Lt. Gov. Ron Ramsey, each said they back the arrangement and the legislation to come.

Ramsey chalked it up as “a big win for unified Republican government on the jobs front.”

“The governor has negotiated a deal that promoted economic growth and jobs creation while protecting the interests of brick and mortar businesses who are the backbone of our economy,” Ramsey said in a written statement.

PROPERTY SALES 41 308 2,265
MORTGAGES 47 379 2,607
BUILDING PERMITS 128 1,018 6,068
BANKRUPTCIES 53 255 1,787