Gov. Bill Haslam announced a new agreement with Amazon.com Thursday, granting the Internet retailer a two-year reprieve from collecting state sales taxes from Tennessee customers.
Haslam said Amazon will hire 1,500 more workers in Tennessee in addition to the ones the company already has agreed to employ, bringing its investment in the state to $350 million and 3,500 jobs.
“We are proud that this worldwide brand has chosen to make a significant investment in Tennessee and is committed to expanding its presence here,” Haslam said. “This agreement balances meeting the needs of the company and the needs of the state by providing certainty to Amazon and brick-and-mortar retailers in Tennessee regarding sales tax.”
The deal negates an earlier agreement last year with Haslam’s predecessor, Phil Bredesen, in which Amazon was given the tax break indefinitely in return for spending $140 million to open two distribution centers in Southeast Tennessee and employing some 1,500 workers.
That Bredesen deal set off a controversy in last year’s legislative session, with brick-and-mortar retailers like Wal-Mart and Best Buy saying the exemption puts them at a competitive disadvantage.
Senate Finance Committee Chairman Randy McNally, R-Oak Ridge, sponsored legislation to require Amazon to collect state and local sales taxes, which add up to 10 percent in some places. That would have added $11 million a year to the state treasury, according to legislative analysts.
The nation’s retailers association threatened to sue if Amazon weren’t compelled to collect taxes in Tennessee.
In July, Amazon announced plans for a third Tennessee distribution center — this one in Lebanon. The company said the facility will create 500 full-time positions.
Under Haslam’s deal, the governor said Amazon will open two more distribution centers. Several Middle Tennessee cities are negotiating with Amazon to try to land those two warehouses. Amazon will begin collecting sales taxes on Jan. 1, 2014.
Haslam said he will present the agreement for approval to the legislature in next year’s session. House and Senate leaders said they will support it.
Many other states are in disputes with Amazon over sales taxes. In Congress, Sen. Dick Durbin, D-Ill., has introduced legislation requiring all online retailers to add sales taxes to customers’ bills.
As part of the new agreement with Amazon, Haslam said he has pledged to lobby for what he called a national solution to the online tax issue. In South Carolina, where Amazon is building a $125 million warehouse, the company now is hiring workers after receiving a four-and-a-half-year tax exemption. In California, Amazon has struck a deal to delay collecting taxes for a year.
The Alliance for Main Street Fairness, a coalition of brick-and-mortar retailers, immediately criticized Amazon's two-year reprieve as too long.
“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,” asked Mike Cohen, the coalition's spokesman. “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?”