Amazon Threatens to Halt New Warehouse Plans

A showdown between Amazon.com and state governments is spreading as the online retailer threatens to shutter more plans for distribution centers in disputes over demands that the company collect taxes on its huge Internet sales.

Amazon this week said it would halt construction on two distribution centers in Tennessee of the state legislature moves ahead with a measure that would require sales taxes for in-state customers once the facilities open.

The online retail giant scratched plans last week to build a warehouse in South Carolina and closed another facility in Texas in February over legislation that would require Amazon to collect in-state sales tax on sales. Amazon had already started building the million square-foot facility near Columbia, S.C., and had said it would employ more than 1,200 people.

Amazon still has in place plans to build two distribution centers near Chattanooga, Tenn., and this week announced that it will open a 500,000 square-foot fulfillment center in Sumner, Wash.

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But Amazon is threatening to halt construction on the two Tennessee-based facilities because two Republican lawmakers are pushing legislature that would require Amazon to collect sales tax from in-state customers once the facility is open.

The issue falls under the The Internet Tax Freedom Act, passed in 1998, which says Internet retail companies are required to collect in-state taxes if that company has a physical presence in that state.

Amazon.com, however, says their distribution centers do not count as a physical presence, as the sales are not coming out of those facilities, but rather on the Web.

The disputes in the various states come as traditional retailers are criticizing what they say is an unfair advantage for pure e-commerce companies.

Sen. Dick Durbin, D-Ill., said last month he wants to introduce legislation that would require online retailers to collect sales tax across the nation. The bill, which would be called “The Main Street Fairness Act,” aims to force companies like Amazon to play by the same tax rules as ‘bricks-and-mortar’ businesses.

“Between 2009 and 2012, states across the country, including Illinois, are expected to lose as much as $37 billion in uncollected state and local taxes on internet and catalogue sales,” Durbin said in late April. “From 2005 to 2010 the state of Illinois estimated it lost $153 million each year.”

“Main Street retailers collect sales taxes on behalf of consumers,” Durbin said. “Why shouldn’t online retailers do the same?”

--Contact Dana L. Brundage at dbrundage@joc.com. Follow her on Twitter @brundage_joc