Given the forces arrayed against him, Gov. Bill Haslam faces a major policy defeat during his first year in office. In addition to getting bad advice, his natural tendency to avoid confrontation and make everybody happy is putting him in an untenable situation.
Haslam first took the advice of his deputy governor to go along with a deal to allow Amazon to operate facilities in Tennessee without collecting sales tax. He didn’t get out in front of the issue and it’s coming around to bite him in the butt.
The state’s newspapers are questioning secret letters for tax rulings, prompting the administration to say some of them will be released, but not all of them. Redacted of course. Someone evidently told Haslam the press would be satisfied with that. Expect open records requests. If Haslam were a county commissioner, he would be getting sued about now.
The state’s retailers are on the warpath. They have lawyers standing by and are likely waiting for the state attorney general to opine on the law before going to court. They will have an army of lobbyists to descend on the next session of the Legislature.
The attorney general has already said a law requiring Amazon to collect the tax would be constitutional. He is now being asked to say no law is needed, because present law requires it. State Sen. Randy McNally, R-Oak Ridge, and state Rep. Charles Sergeant, R-Franklin, asked for the AG opinion and are standing by with legislation to enforce the collection of the taxes if necessary.
Local governments are beginning to catch on that if not collecting sales tax spreads, local budgets will be hurt. Last year Amazon had sales of $34 billion. Tennessee has 2 percent of the national population, which means the state’s portion of Amazon sales should amount to about $648 million in sales without sales tax being collected. Take it down to Knox County’s share of losing 2.25 percent sales tax on its share of Amazon sales; Knox County may be losing an estimated $1 million a year in local sales tax.
State House Majority Leader Gerald McCormick, R-Amazon, is not happy. The Chattanooga legislator learned from a reporter that Haslam has been negotiating a compromise with Amazon to collect taxes somewhere down the road.
Haslam has been advised on handling this deal by his deputy governor, Claude Ramsey, the industrial recruiting guru and former mayor of Hamilton County, who played a major role in getting Amazon to build distribution centers near Chattanooga. Who is Ramsey working for? His hometown or his governor?
Haslam says he will seek congressional help in getting national legislation to settle the sales tax issue, so Amazon can’t jump from state to state and threaten to pull out if they have to collect taxes. But when a reporter asked Haslam ally and friend U.S. Sen. Bob Corker his position on the issue, Corker said he wasn’t sure he would support the current bill. Huh?
The situation is murky. Who gave Amazon the letter that gives them permission to skirt the tax law? We told you earlier that the Bredesen administration had scheduled a rule-making hearing in the waning days of its tenure. If Bredesen had already given Amazon a letter outlining a deal, why was a hearing scheduled to change the regulations? (The hearing was canceled and never rescheduled by the Haslam administration.)
So if Amazon didn’t have a letter until they got it from the Haslam administration, how is it just ratifying an agreement between Amazon and the Bredesen administration?
Amazon collects sales tax in five states (Kansas, Kentucky, New York, North Dakota and Washington) where it has facilities. That proves they can do it, have the computer software to do it, and they are not collecting it because it gives them almost a 10 percent price advantage over brick and mortar retailers in Tennessee.
The governor needs to look at the forces arrayed against his position, realize he is getting bad advice to stonewall, and tell Amazon to collect the tax. Even if it makes somebody mad.