Legislation aimed at Amazon is apparently pending in California and Missouri.
Tennessee legislators are now joining the sales tax fracas that could cause Amazon to exit Chattanooga and Bradley County. Senate and House Finance Committee Chairmen State Sen. Randy McNalley, R-Oak Ridge, and State Rep. Charles Sargent, R-Franklin, are considering similar sales tax legislation.
State Rep. Kevin Brooks said changing the terms on Amazon would be no different than a mortgage company changing the interest rate on a home loan after it closes.
“When I worked at retail in Bradley Square Mall, we had to be careful of advertising one product and trying to sell another one,” Brooks said. “It’s called bait and switch. If we tell Amazon we’re going to do one thing and when they get here we do another, then Tennessee is guilty of bait and switch.
“If Tennessee tries to tax Amazon where there are no cash registers, and there is no point of sale, and there’s nowhere to generate taxation, then that is taxation without representation. We’ve been down that road.”
Sargent said Thursday he was not sure what he was going to do, but the senator seemed more firm in his interview about Amazon.
“At the present time we don’t know what exactly was agreed to by our former governor (Phil Bredesen). We may do something to prevent this from happening in the future and not worry about what is in the past,” Sargent said. “There are a couple of different options we’re looking at.”
McNalley said, “I’m not sure there is an agreement. If there is, I’d be concerned that an agreement was entered into and the legislature or the people of Tennessee were not informed of it.”
He said the Senate bill as amended would make sure a business with a subsidiary or an affiliate in Tennessee collects sales tax.
He said other businesses have tried to set up independent Internet-based businesses, but because they had an operation in Tennessee, they were required to collect sales tax.
“This is the part of the sales tax statute we are amending. Whether it affects Amazon or not, I don’t know specifically how it would, but if they do have a location in Tennessee, they like other businesses should collect sales tax,” McNalley said.
Sargent said nothing has been decided and the House finance committee is trying to work through the issue “to see where we need to go. I would like to work something out, but I think that would have to be the governor. I think that would have to be an initiative coming from the executive branch to work something out. If it can’t be worked out, we may just prevent something like this from happening in the future.”
Sargent said he was aware Amazon departed Texas and South Carolina and has heard of other disputes all across the country.
“I think Amazon owes the citizens of Tennessee or whatever state they are in. If every state did this, they can’t move out of every state. At some point in time, a corporation has to step up to the plate and do the responsible thing for the 6.4 million people in Tennessee,” he said. “Collecting sales tax is a state and federal issue.”
McNalley said Amazon stated it would leave Texas and South Carolina, but he is not certain the company actually left those two states, but he has had no communication with Amazon at all.
“I know in Texas they laid a number of people off, but did not really close the facility,” he said. “In South Carolina, they stated they would leave, but have not really left.”
State Rep. Eric Watson said he met with Amazon officials and they are serious about pulling out of Tennessee and moving to Arkansas. Watson intends to address the Bradley County Commission on Monday about meeting with Amazon.
Brooks said two other companies, in addition to Amazon, also departed South Carolina. Whether promises made by the former administration were good or bad is not the point. The point right now is that the bill is trying to change the ability of the state to tax a company.
“It has now cost South Carolina three multimillion-dollar development projects,” Brooks said. “It is very troubling that our Tennessee government and Tennessee legislature are acting in a manner unbecoming of keeping our word.”
Sargent used the example of going to Walmart’s website where he would have to pay sales tax because it has brick and mortar stores. What’s the difference if an item is sold from a storefront or distribution center to someone in Tennessee.
It is, he said, unfair competition between Amazon.com and traditional retail businesses.
“What’s the difference between that or going online to J.C. Penney or Sears and ordering something off the Internet? Because they have a brick and mortar store, I have to pay the tax,” he said. “Is it just because Sears has a cash register and Amazon doesn’t? I’m not using Sears’ cash register. I’m using a credit card.”
The senator said he is concerned Amazon could erode sales tax collections in the future. The potential exists for other companies to sue the state if the sales tax requirement is not placed equally on all businesses.
“There could be an erosion of the sales tax we rely on to fund state government,” he said.
McNalley said he doesn’t know for sure there was an agreement between the state and Amazon.
“If the previous administration made the agreement, then I think it’s up to us to weigh the fact that somebody pledged the state to do something versus what the law says,” the senator said.
“It’s a complex issue, but it’s certainly solvable. The first step is to find out if there was an agreement. It’s in the public’s interest to find out if there was an agreement.”
Brooks said the difference is that Amazon is purely a distribution center. When an item is purchased through Amazon.com, the electronic transaction is handled in the state of Delaware. Even when an item is returned to Amazon, that transaction is not handled in the state of Tennessee.
“There are no cash registers like there are in Walmart, Best Buy and AutoZone. There is no point of sale at the Bradley County Amazon.com site. They are purely distribution only,” Brooks said.
Sargent said the legislation would not hinder job creation efforts.
“I want job creation throughout Tennessee. It’s a matter of what’s the right thing for the 6.4 million people in Tennessee? What’s the right thing for education dollars and things of that nature,” he said.
He said Bradley County did not abate the share of taxes that go to education, but an adjoining county might and that makes it a state issue.
McNalley said many states are looking at a U.S. Supreme Court ruling in Quill Corp. versus North Dakota which stated it would be too much of a hardship for states to force companies to collect sales tax.
Brooks said there is a movement in Washington to streamline the sales tax, which lines up with Gov. Bill Haslam’s statement, that it is a federal issue.
“I support Gov. Haslam and I agree it does need to be looked at, but not this deal, not at this time,” Brooks said.
Watson said at this point, it looks as though the House bill is dead.
Sargent said, “There may not be anything we can do about Amazon, but I think we have to look hard and long to see if this is what we want to do for the future. This is an issue we’re studying. Kevin and I will work through it, talk sensibly about it and try to figure the best thing for this situation and the best thing in the future.”
Brooks said, “Thankfully, support is growing on the side of we made a deal. We should keep out word.”