Tuesday, January 25, 2011
Phillips Reading the Tea Leaves on the Amazon Deal
Posted by Betsy Phillips on Tue, Jan 25, 2011 at 6:19 AM
When the Amazon deal to bring two distribution centers to the southeast corner of our state was announced, the issue of whether Tennessee residents would have to pay sales tax on Amazon orders was briefly raised and then seemed to fade from public discussion. The Times Free Press had a really good article on why this is an issue and what's at stake:
With nearly 1,500 full-time and as many as 2,200 more part-time jobs planned for Amazon's proposed local distribution facilities, Tennessee may be cautious about getting too tough over taxes.A ruling that Amazon's facilities constitute a physical presence under Tennessee's revenue definitions could mean the state would require Amazon to collect millions of dollars of sales taxes on Tennessee purchases. Tennessee consumers could be required to pay when they order online.
The Times Free Press story certainly made it seem as if it was plausible that Tennesseans would have to pay sales tax on Amazon orders. But that was December. This is January. And now The Seattle Times is insinuating that Governor Haslam is on Amazon's side and willing to work with them to find a way around the sales tax issue:
While acknowledging that untaxed online sales are a growing problem for cash-strapped states, Haslam said tax collectors should not "interfere with our recruiting of Amazon to Tennessee. That's a huge priority for us," he told the Times Free Press.
I think it's hard to tell whether The Seattle Times has more to go on than the initial Times Free Press story, but this is an issue worth keeping an eye on.
Texas is trying to collect $269 million in "unpaid" sales tax from Amazon. (I put "unpaid" in quotes because Amazon is obviously not collecting sales tax on Texas orders, and whether it should be is being decided by the courts.) That's about $10.76 per Texan. If we allow that Tennessee and Texas probably have similar buying habits, that would mean that, by not collecting in-state sales tax on Amazon orders, we'd be giving up about $64.5 million dollars in potential tax revenue.
That's nothing to sneeze at.
Now, people in favor of making this deal are saying, "Look at the jobs." And we are talking about at least 1,500 full-time jobs and as many as 2,200 part-time jobs. It's hard to even begin to imagine the positive impact that many jobs will have on that part of the state.
But it's warehouse work, at the end of the day. Are those 3,700 people going to add $64.5 million dollars to the economy every year? I don't know. Maybe, when you consider not just what they might spend, but the economic impact of the businesses that spring up to serve them.
And maybe, even if they don't add that much money to the state coffers, it's worth it because it's far better to have people working than not working. Maybe you can't put a purely monetary value on what it means for people to have jobs.
I don't know, myself. But the state's financial situation isn't looking any rosier this year or for the next few years. And that's a lot of money to leave sitting on the table when we're talking about further cuts to already bare-bones government programs.
Whatever happens, it shouldn't just happen in some backroom deal. We should talk about it as a state and understand why we're making whatever deal we end up making.
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