A new study released this week estimates that over the next five years, the failure of remote, online retailers to collect sales tax will cost the state of Tennessee more than 10,000 jobs and about $3 billion in revenue. The study, “The Impact of Sales Tax Loss to E-Commerce in the State of Tennessee,” was created by the market research and economic consulting firm Younger Associates.
The study concluded that the failure to equitably collect sales tax costs the state in additional ways, as well. It noted: “The loss of jobs and wages would also trigger losses of other types of state tax revenues as spending on taxable items such as gasoline, vehicles, alcohol, tobacco, and amusement decline. Revenues from taxes and fees on businesses would also decline as businesses downsize due to reduced consumer spending.” Tennessee depends on state sales taxes to provide for basic services including the salaries for teachers, police, firefighters, and other first responders.
“The Younger study confirms what we have argued for a decade now, that the failure of state taxing authorities to enforce existing sales tax laws not only harms in-state retailers, but also creates a cascade of harmful effects throughout a state’s economy,” said ABA CEO Oren Teicher. “The study underscores the costs when states fail to ensure that companies with nexus in the state — through warehouses, offices, or online affiliates acting as sales agents — follow existing sales tax laws. We believe the data here is relevant to any state that has made, or is thinking of making, deals exempting retailers like Amazon.com from sales tax collection in exchange for the promises of jobs. As this study makes only too clear, those deals are only a win for Amazon.com.”
Tennessee has been among those states at the forefront of the sales tax fairness debate this year. In June, Amazon threatened to cancel plans to build two new distribution centers in Tennessee if it was not provided with a sales tax exemption. Following the ultimatum, Rep. Sargent (R-Franklin) tabled HB 136 (SB 529), sales tax fairness legislation that he had introduced. HB 136 would have required any remote retailer that maintains or owns a facility, office, distributing house, sales “room,” warehouse, or other place of business — directly or through a subsidiary, agent, or affiliate — to collect and remit sales tax in the state.
More recently, Amazon.com's very public efforts to avoid collecting sales tax in California culminated with the company agreeing to drop its referendum vote to overturn the state legislation in return for a year-long delay in its obligation to collect state sales tax.
Mike Cohen, spokesperson for the Alliance for Main Street Fairness, which commissioned the Younger study, said in a statement, “While we are glad to hear that Amazon has agreed to collect sales taxes just like every other business in California, we need action now in Tennessee. We hope Gov. Haslam can get Amazon to do in Tennessee what they now have conceded they are will to do in California, which is play by the same rules as everyone else.”