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Wednesday, October 23, 2019

Tenn. AG: Amazon must collect sales tax

By Jessica M. Karmasek | Oct 5, 2011


NASHVILLE, Tenn. (Legal Newsline) - Tennessee Attorney General Robert Cooper says online retailers, such as Amazon, do have to collect sales taxes if they open warehouses in the state.

In a four-page opinion released Tuesday, Cooper said current state law requires retailers that directly maintain or own an in-state distributing house or warehouse in Tennessee to collect sales taxes.

"On the other hand, if the in-state distributing house or warehouse is owned by a retailer's subsidiary, instead of the retailer directly, nexus is established only if the subsidiary's in-state activities are significantly associated with the retailer's ability to establish and maintain a market in Tennessee for its sales," he wrote.

In cases where nexus, or physical presence, can be established, the fact that the retailer accepts purchase orders electronically will not affect the retailer's liability for collecting and remitting state sales taxes, Cooper said.

The Retailers Sales Tax Act, he said, does not contain a specific exemption relative to an out-of-state retailer's obligation to collect sales taxes under state code.

In applying this and other provisions of the act, the state Commissioner of Revenue is required to consider whether imposing the tax is consistent with any other provision of law, including the U.S. Constitution.

The attorney general noted that the commissioner possesses "substantial discretion" in determining the "best measures" to take to enforce the state's tax laws.

"The exercise of such discretion is particularly appropriate where the enforcement of a tax may be debatable," Cooper wrote.

Enforcement, he said, must be balanced with the department's other competing duties and priorities and weighed against the possibility that a contested legal proceeding could result in the State's payment of significant legal fees and expenses to taxpayer.

Cooper's opinion was requested by state Sen. Randy McNally, R-Oak Ridge, and state Rep. Charles Michael Sargent, R-Franklin.

McNally, also the Senate Finance Committee chairman, introduced a bill earlier this year that could force out-of-state dealers like Amazon to collect sales taxes on items sold to Tennessee residents.

Cooper, in a June opinion, deemed the proposed bill "constitutionally defensible."

However, the legislation reportedly won't be taken up until January.

In the meantime, Amazon, the largest online retailer in the United States, is spending nearly $140 million to build distribution centers in Tennessee, with plans to build more.

The distribution centers are expected to create thousands of full-time and seasonal jobs.

The construction is part of a deal former Gov. Phil Bredesen agreed to last year, granting Amazon a waiver on collecting sales taxes from Tennessee customers. "Traditional" retailers in the state have argued that the deal is unfair.

"As more facts and information are made public, it is becoming increasingly clear that Amazon's argument against sales tax collection is evaporating. A recent opinion by Tennessee's attorney general proves that under the law as written Amazon has a physical presence in the state and should be collecting sales taxes when its distribution centers open," Mike Cohen, spokesman for the Alliance for Main Street Fairness in Tennessee, said in a statement Tuesday.

"Amazon first stated they couldn't collect sales taxes, then stated it was unconstitutional, and now, in California, they have conceded they can, should and will collect."

Cohen said Amazon is building the same distribution centers in California that they are in Tennessee.

"They should play by the same rules in our state," he said.

"Any claim by Amazon that they merit a special deal in Tennessee is intellectually insulting and just plain wrong. Amazon must follow the law and collect sales taxes just like every other retailer in the state."

From Legal Newsline: Reach Jessica Karmasek by email at

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