Tennessee's tax-free honeymoon with Amazon is officially over.
Tennessee residents will now see an additional charge on their Amazon purchases, as the online retailer is now required by the state to collect sales tax.
For years, Amazon purchases made by Tennessee residents were tax-free at the time of purchase. Emails were sent out annually, letting consumers know how much they had spent on Amazon purchases the previous year so taxes could be filed accurately, but it was up to the shopper to include those taxes in their tax forms.
According to Amazon, in certain states where the website does not have a "physical selling presence" and there are no laws specifically requiring sales tax to be added, the retailer is not required to collect such tax.
That's due to the Internet Tax Freedom Act that was reenacted by former President George W. Bush in 2007. However, states are still able to enact laws requiring online retailers to collect sales tax.
Senator Jim Kyle of Memphis, who opposed the tax in committee, said requiring the sales tax has not been shown to deter online shopping, and Amazon collecting taxes will not make small businesses more competitive with online vendors.
"It's still a tax increase that this Republican-led government has brought us," said Kyle, a Democrat. "You can spin this however you want to, but people like you and me are paying for it."
Republican Senator Brian Kelsey, who voted in favor of the tax, didn't return calls for comment.
In Tennessee, the previous deal struck by former Governor Phil Bredesen allowed Amazon to build two distribution centers in the state, creating 1,500 full-time jobs and, despite the "physical selling presence," the deal made it so that Amazon would not be required to collect taxes.
The current governor, Bill Haslam, signed a bill in 2012 that required Amazon and other remote sellers to not only collect state tax on goods, but also to build a new distribution center and maintain at least 3,500 full-time positions until 2016 — an additional 2,000 jobs than was in the previous agreement with Bredesen.
"There are a lot of contributing factors that go into our thought process as we decide where to place our fulfillment centers," said Nina Lindsey, a spokesperson for Amazon. "Most importantly, we want to make sure a fulfillment center is placed as close to the customer as possible. We look closely at the local workforce, and we've found great talent in abundance across [Tennessee]."
The bill grandfathered in the two distribution centers in Chattanooga and Charleston built in 2011. Distribution centers in Murfreesboro and Lebanon opened last year. Last November, The Tennessee Journal reported an expected $8.8 million increase in revenue from the tax.
Tennessee joins 18 other states in being charged tax on online sales. Mississippi and Arkansas residents, however, remain free from tax collection by the online retailing giant.