July 27, 2011

Retail Group May Sue Tennessee if Amazon Receives Sales Tax Exemption


by John Buhl


Published by Tax Analysts®


The Retail Industry Leaders Association (RILA) reportedly is willing to sue Tennessee over a proposal to exempt Amazon.com from collecting sales taxes.


Amazon is currently negotiating with Gov. Bill Haslam (R) to ensure that it would not have to collect taxes on sales into Tennessee if it opens two distribution centers in the state later this year. The company also has told lawmakers it may not follow through with those plans if it has to collect Tennessee sales taxes.


RILA attorney Bill Hubbard told the Chattanooga Times Free Press that the group may take the state to court if the exemption goes through.


“I think the court is a potential remedy for my client,” Hubbard told the paper.


National retailers including Wal-Mart Stores Inc. and Target Corp. have recently joined smaller local businesses in calling for states to adopt “Amazon” laws, hoping to level the playing field with online-only retailers that thus far have mostly lacked tax collection requirements.


Those laws have prompted lawsuits in New York, Colorado, and Illinois as well as the cancellation of online affiliate marketing agreements in several states.


Groups such as the Alliance for Main Street Fairness, which represents large and small brick-and-mortar retailers, have also publicly criticized sales tax exemption deals offered by states trying to lure Amazon to open distribution centers that would bring in new jobs.


Tax Analysts contacted RILA but had not received comment at press time.


Steve DelBianco, executive director for NetChoice, a coalition of e-commerce businesses, questioned the usefulness of such a lawsuit.


“It’s amazing that RILA’s big box chain stores would sue to stop the state from attracting new jobs and investment for Tennessee,” DelBianco said in an e-mail to Tax Analysts. “But then again, the big box chains routinely decimate jobs at Main Street retailers whenever they open a new superstore.”


Attorney General Robert E. Cooper Jr. on June 28 issued an opinion that lawmakers could pass legislation requiring a taxpayer to collect taxes after opening distribution centers in the state, even if the governor or Department of Revenue gave the company an exemption.


The opinion came in response to a request filed by Sen. Randy McNally (R) and Rep. Charles Sargent Jr. (R), who sponsored legislation (SB 529) seeking to require Amazon to collect Tennessee taxes. The bill stalled but will likely come up in the 2012 legislative session.