Thursday, June 21, 2018
Business

State weighs whether to tax Amazon's online sales or cut jobs deal

TALLAHASSEE — Amazon's state-by-state strategy to score lucrative tax-exemption deals in exchange for creating jobs has landed in Florida.

The online retailer is talking to state legislators about spending up to $200 million to build distribution centers in the state, creating as many as 3,000 jobs, the Associated Press reported. The catch? The company wants a pass on sales taxes for two years.

The proposal — which mirrors deals Amazon has made with other states in the past year — comes at a time when a push to expand sales tax law onto the Internet is gaining steam in the state Legislature.

Business groups behind several e-tax bills have balked at Amazon's proposal.

"This is a bad deal for Florida, and lawmakers should reject it," said Rick McAllister, president and chief executive officer of the Florida Retail Federation, in a statement calling the proposal a "backroom deal."

Under Gov. Rick Scott, Florida has been aggressive about offering incentives for businesses to set up shop in the state. But an exemption from sales taxes would be unique, and it remains to be seen just how big of a break it would be.

It's unclear how much of Amazon's $40 billion in annual revenue comes from Florida shoppers, but there are estimates that the state loses more than $1 billion each year in uncollected sales taxes from online sellers. Amazon's media relations department could not be reached for comment Wednesday.

Other states have struck similar deals recently with Amazon, giving the retailer an extended tax holiday in exchange for a promise to create jobs.

Last year, South Carolina Gov. Nikki Haley approved a deal that would leave Amazon sales-tax-free for nearly five years after the company agreed to spend $125 million building distribution centers and hiring 2,000 Carolinians.

California settled with the company last year, giving Amazon a one-year tax holiday as a way to end litigation over the state's aggressive e-tax law. Earlier this month, Indiana Gov. Mitch Daniels gave Amazon a break on sales taxes until 2014, although the company has been operating there tax-free since 2008.

Some states have taken a more aggressive approach, passing legislation that forces online retailers to collect taxes on sales regardless of whether they have a distribution center or a store in the state. Legally, only companies with a "nexus," or physical presence, in a state are required to pay sales taxes there. Consumers who buy goods online are supposed to self-enforce the sales tax, but hardly any do.

Amazon has fought against states that have tried to force its hand on taxes, filing several lawsuits and closing warehouses in some states.

The retailer has recently come out in favor of a federal law requiring online sales taxes but wants the law to apply to small retailers as well. The company could profit by selling its tax collection services to those smaller companies that would have to comply with the new law.

Since a federal deal doesn't seem imminent — and states are becoming more aggressive about passing online tax bills — Amazon has begun cutting deals in states where it would like to have a physical presence.

Critics of a Florida deal question whether the unique sales tax incentive is necessary to bring Amazon to the Sunshine State.

"There's a good chance that Amazon would come and build here whether we offer them the incentive or not," said John Fleming, spokesman for the Florida Retail Federation. "Florida is the fourth-largest state in the country."

Amazon's distribution centers in Tennessee and South Carolina — many of them built last year after tax-exemption deals — are the company's only outposts in the Southeast. A Florida center could be valuable for the global retailer, which is expected to double its revenue to $100 billion over the next five years.

But Amazon has proved to be a tough negotiator, taking advantage of a down economy. When Texas and California tried to enforce an e-tax last year, the company shut its distribution center in Irving, Texas, and fired 25,000 affiliates in California.

In South Carolina last year, Amazon threatened to halt construction of its fulfillment center if the state Legislature did not pass a tax-exemption bill. The bill, which allows the retailer to operate tax-free until 2016, passed by a wide margin after nearly a third of the state's lawmakers changed their votes.

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Published: 06/21/18