A discussion draft of the Online Sales Tax Simplification Act of 2016 is expected to be introduced in Congress soon.
A retail group’s ads call on Tennessee to require Amazon.com to collect sales tax.
The Alliance for Main Street Fairness, a retailer lobbying group, is running ads in Tennessee-based newspapers and web sites calling on the state to require Amazon.com Inc. to collect and remit sales tax on its sales to Tennessee residents.
With illustrations of a group of people who look small compared with a large single figure representing Amazon, the ads say: “All the little guys on Main Street have to collect sales tax from their customers. Shouldn’t the biggest guy have to collect sales tax too?”
The ads go on to say that Tennessee residents should be “thrilled” that Amazon plans to build new distribution facilities in the state, but that Amazon shouldn’t be allowed to forego collecting and remitting sales tax.
The Alliance for Main Street Fairness contends that the state has agreed not to require Amazon to collect sales tax on purchases by Tennessee residents, despite having a physical presence in the state by virtue of the two distribution centers. A spokeswoman for the state Department of Revenue said the department could not comment on the tax-paying responsibilities of any company or individual, citing state law prohibits the disclosure of such information.
The state has said that Amazon plans to invest up to $139 million to build two fulfillment centers, producing up to 1,400 jobs over the next three years.
Although the retail group didn’t say how much it’s spending on the ad campaign, a spokesman said it’s spending “a sufficient amount of money for daily publishers running the ads repeatedly in print and online.” The media outlets in the campaign include The Tennessean in Nashville, The Commercial Appeal in Memphis and the Knoxville News Sentinel, in addition to an unnamed number of news and consumer web sites.
Amazon, No. 1 in the Top 500 Guide, did not immediately return a call for comment.
It has been reported that Amazon does not collect sales tax in six states where it has distribution centers operated by Amazon.com Kydc LLC, which Amazon.com Inc. contends is an entity separate from Amazon’s retail business. Those states are Nevada, Arizona, Indiana, Virginia, Pennsylvania and Texas. Tax and legal experts say companies have been able to operate distribution operations as legally separate entities without creating nexus in a state for tax collection responsibilities. Under a 1992 U.S. Supreme Court ruling, companies are only required to collect sales tax in states where they have nexus, or a physical presence.
The Department of Revenue spokeswoman noted that nexus is a complicated issue that gets addressed on a case-by-case basis. But she added: "Typically, if a company opens a warehouse in Tennessee, that company will have nexus. However, whether a subsidiary company or other related companies will have nexus because of the warehouse will depend on the operations conducted by the warehouse and its connections to the parent [company]."
According to figures from the University of Tennessee, states would take in nearly $20 billion in additional sales tax revenue this year if Internet and catalog retailers did not have such a sales tax exemption.