October 6, 2011, 12:21 PM

Amazon agrees to collect sales tax in Tennessee by 2014

The retailer plans to build warehouses and create thousands of jobs in the state.

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Tennessee Gov. Bill Haslam announced an agreement with Amazon.com Inc. today under which the retailer would begin collecting sales tax in the state by January 2014. In the meantime, Amazon would build distribution centers and create thousands of jobs in the state and lobby for a federal law supporting nationwide sales tax collection. The agreement must still be approved by the Tennessee General Assembly.

“We’re grateful to Gov. Haslam and the legislative leadership for their commitment to Tennessee jobs and development, which will allow Amazon subsidiaries to create at least 3,500 full-time jobs and $350 million in investment in the state,” says Paul Misener, vice president of global policy for Amazon, No. 1 in the Internet Retailer Top 500 Guide. Amazon has agreed to develop 2,000 more jobs than it had initially planned in Tennessee, says Haslam, a Republican.

Today’s announcement followed a legal opinion issued earlier this week by Tennessee Attorney General Robert Cooper, who clarified that “as a general rule, the state of Tennessee cannot contractually waive” sales tax responsibilities. Cooper’s opinion was requested by state legislators who were opposed to granting Amazon an exemption from sales tax collection in exchange for its plans to build distribution centers in the state.

Cooper’s opinion, however, also noted that state officials have “substantial discretion” in determining the best way to administer tax laws.

As occurred in California last month, Amazon was able to solidify with Tennessee an agreement that exempts Amazon from collecting sales tax for an extended period while it proceeds with plans for job-creating distribution facilities and lobbies for a federal sales tax law. “We’re committed to working with Tennessee and Congress to pass federal legislation as soon as possible and, as analysts have noted, we’ll continue to offer customers the best prices, regardless of whether sales tax is charged,” Misener says.

Unlike in California, where a temporary exemption from collecting sales tax applied to all online retailers, however, the Tennessee exemption applies only to Amazon, according to a spokesman for the Tennessee Department of Revenue.

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