Amazon Shopper? Get Ready To Pay Tennessee Sales Tax On Jan. 1

Amazon now has distribution centers in Lebanon, Murfreesboro and in the Chattanooga area. Normally, having a physical presence in the state would automatically require a retailer to collect sales taxes, even with online purchases. But the company has negotiated agreements with states in exchange for creating jobs. Credit: luxuryluke via Flickr

Starting in January, Amazon will begin charging Tennessee customers sales tax for the first time. And while the online retail giant has been posting huge sales figures in recent quarters, the estimates for what the company will bring Tennessee is a little less eye-popping.

State government has been missing out on an estimated $400 million a year in sales tax revenue from online purchases. But University of Tennessee economist Bill Fox says only a fraction of the missing money is a result of the industry leader.

“So as important as Amazon is, there are a lot of other e-commerce sales out there.”

In fact, many transactions made through Amazon.com are really with some of the – according to Fox’s research – 2 million mom-and-pop web retailers who use the site to sell their goods. Those firms and perhaps millions of others still won’t have to charge taxes if they’re located outside the state.

State accountants estimated in 2012 Tennessee was missing roughly $23 million in sales tax from Amazon purchases. That figure presumably has gone up as the company’s sales have grown by double digits in many quarters.

Amazon has been operating under an exemption negotiated after it started building warehouses in Tennessee several years ago. Similar arrangements with other states have been expiring in recent months.

Congress has been considering the Marketplace Fairness Act, which would allow states to compel retailers to charge sales tax, no matter where they’re located.

GOVERNOR SAYS REVENUE SORELY NEEDED

Governor Bill Haslam says Amazon tax revenue will make a big difference, as his administration writes its next budget.

“Obviously, it’s a big deal, we have a tight budget and I think a lot of people see that as a new tax. But what I try to remind a lot of people is the items being bought from Amazon, they were buying from a local store before.”

Total revenue collections for the fiscal year to date have missed their budget estimates by more than $100 million. Despite that, the Governor is defending cuts in food and estate taxes enacted by the General Assembly.

WPLN’s Bradley George contributed to this story.