Stateline Story

Amazon Cuts Another Deal, Will Collect Tax in Tennessee

  • October 07, 2011
  • By John Gramlich
Amazon, the nation's largest online retailer, agreed Thursday (October 6) to begin collecting sales taxes from Tennessee residents in 2014, the Chattanooga Times Free Press reports .

It's the second time in a month that the company has struck a deal to collect sales taxes in an individual state, something it had refused to do for years. Last month, Amazon agreed to begin collecting sales tax from California residents next year. The agreement with the nation's most populous state - considered the major player in the long-running battle over whether online retailers should have to collect state sales taxes - came in the waning days of California's legislative session and helped avoid a costly ballot measure fight.

As Stateline has reported , Amazon's deal with California led many state and retail-industry officials to predict that the company would have to agree to similar deals elsewhere. "We think it's a game-changer," Rick McAllister, president and CEO of the Florida Retail Federation, said of the arrangement. "We think that if Amazon would make the deal they made in California, we don't understand why they wouldn't make the deal in other states."

The company's deal with Tennessee validates those predictions. The firm not only said it would collect the Tennessee sales tax, but that it would double the number of workers and distribution centers in the state. In exchange, Amazon will have a three-year grace period - as opposed to just one year in California - to prepare to collect the tax.

With two states now reaching deals with Amazon, there will be added pressure on Congress to come up with a national policy governing the collection of sales taxes by online merchants. The National Conference of State Legislatures and other organizations have been lobbying for just such a policy for years, saying it is unfair that brick-and-mortar retailers must collect sales taxes but online businesses do not. For states, of course, the collection of online sales taxes represents far more revenue at a time when they desperately need it.