Lawmakers spent much of last year riding a political roller coaster to define Amazon.com’s role in collecting sales taxes from online shoppers. This week they made their first move to approve a deal reached between the state and the online retail titan.

Just a day before Gov. Bill Haslam toured the new Amazon warehouse in Chattanooga Thursday, a House Finance subcommittee easily approved legislation to seal a deal with Amazon to collect sales taxes from its online shoppers beginning in 2014. It will amount to about $23 million a year, according to legislative analysis.

“These sales taxes are already due,” House Majority Leader Gerald McCormick, R-Chattanooga, told the committee as he pitched the bill. “This simply is a collection issue, and they have agreed to collect the sales tax.”

The deal means Tennessee taxpayers who shop online will get to hold on to about $40 million in revenue that could be collected between now and 2014, according to legislative staff.

Haslam and Amazon.com executives announced a deal in October where the Internet retailer would make a $350 million investment by opening distribution centers in Hamilton and Bradley counties. The Internet retailer is opening additional centers in Lebanon and Murfreesboro.

The arrangement, which was called “Project Tango” by officials, grew out of a deal struck between outgoing Gov. Phil Bredesen and Amazon executives just weeks before Haslam took office.

Lawmakers quickly split on the issue. Although they liked the prospect of Amazon creating thousands of jobs in the state, some argue the company ought to be forced to collect money from Tennesseans for the government just like any other business located here.

One of those critics, who says he is satisfied with the current deal, says he doesn’t see the bill hitting any snags making its way through the Legislature, even though Amazon has brokered deals in other states that require the company to collect sales taxes as soon as September.

“There are a number of states that are not collecting a penny, and this is something we were able to work out, plus the benefit that we are going to have four distribution centers in the state of Tennessee. I think that’s a good thing,” said House Finance Committee Chairman Charles Sargent, R-Franklin.

The issue is one of national significance. Amazon has argued there is no uniform law that requires it to collect sales taxes and that the company doesn’t meet a legal threshold called “nexus” for collecting the taxes because it doesn’t have brick-and-mortar sales facilities in many states seeking the tax.

Giving the Internet retailer a pass on collecting sales taxes is unfair to Tennessee business with a physical state presence because they have to charge customers the tax, says critics with the Tennessee Alliance for Main Street Fairness, a fierce opponent to the Amazon deal in Tennessee and across the country.

Only a federal law requiring the retailer collect sales taxes in all states would trigger Amazon to collect sales taxes any earlier than 2014.

House Speaker Beth Harwell, who met with Amazon executives Wednesday, said she too sees no trouble writing the deal into state law, but wants a national solution from Washington.

“Our federal government has got to take action on this issue, and until they do, all of our hands are tied,” she said.

The state legislation is up again for discussion in both the House Finance committee and the Senate tax subcommittee Tuesday.

Gov. Bill Haslam, who wants to expand taxpayer-funded grants to business, is also suggesting that extra information collected to pick the winners be kept hidden from public view.

“Due diligence” documents such as corporate financial statements, budgets, cash flow reports and ownership information would be reviewed by politicians and agency staff but would not be open under a measure, Senate Bill 2207, that advanced out of a Senate committee Tuesday on an 8-0 vote with little debate.

Haslam, a Republican, wants to pump $70 million into the Fast Track grant program which is used to entice companies like Amazon to locate in Tennessee in addition to tax incentives and tax credits. Under SB2207, the state would collect more information from applying businesses but share none of it with taxpayers.

“You have to recognize that as a private company, that they have a need to keep information private,” Sen. Bo Watson, a Hixson Republican and the bill’s co-prime sponsor, told TNReport.

Both Haslam and his predecessor, Democratic Gov. Phil Bredesen, have faced criticism for keeping lucrative state deals with corporations shrouded in secrecy. In some cases, it’s hard for the public to even know the final tally of incentives provided because of the privacy of tax information, though in the case of Volkswagen, the bill reached hundreds of millions of dollars for expenses like buying land and training employees to work for the car manufacturer.

The measure comes from a long list of bills Haslam wants to see passed this year, including one that would give the Department of Economic and Community Development more flexibility to offer Fast Track grants for high-impact relocations and expansions.

“Using hard dollars from the FastTrack program is more transparent than the tax incentive process, which is completely confidential under law,” Clint Brewer, an ECD spokesman, said via email. “The due diligence bill does not hide anything ECD is doing, it only protects private company finances.”

The “due diligence” business details, which lawmakers want to add as an exemption from open records laws, are additional bits of information Watson says will help the agency do its “homework.”

Under that legislation, the State Funding Board would be able to review insider details for Fast Track grants but the group — made up of the top five officers in the executive branch — will also be required to keep that information confidential.

ECD now decides which companies to invest in without that “due diligence” level of insider information. It now reviews and keeps proprietary information and any trade secrets close to the vest.

One government transparency advocate contends the documents Haslam is looking to keep out of the public eye are already protected under state law. But push comes to shove, the most important information that needs to be public are the final details of the arrangement: Who is getting how much money?

“Our concern was that language dealing with ownership could be construed to say that they didn’t have to say who they were giving grants to,” said Frank Gibson, director of the Tennessee Coalition for Open Government, who is not fighting the bill because the company name would still be public information on the final ECD contract, even if the owner’s name isn’t.

“Eventually people are able to find out who they are. Volkswagen LLC is still Volkswagen.”

Press Release from the Tennessee Alliance for Main Street Fairness, Jan. 26, 2012:

Sen. Alexander, Gov. Haslam Voice Support as Businesses Gather in Six Cities, Including Nashville

Nashville, TN – Businesses across Tennessee joined together today to support giving brick and mortar merchants a level playing field with online and catalog retailers. Such retailers are currently exempt from collecting and paying the state sales tax, which puts local stores at a huge price disadvantage.

In Nashville they gathered in Green Hills at Nashville Trunk and Bag.

“As long as the government continues to say you can buy this product at our store and pay sales tax or buy it online and save the sales tax, we’re going to continue losing business because of that policy,” said Susan Cavender, owner of Nashville Trunk and Bag. “That’s just wrong. Cities need local businesses and we need a level playing field.”

Cavender, Ron Shuff of Ron Shuff Music and Lori Elam of My Sister’s Closet are among those joining a steering committee of the Alliance for Main Street Fairness to push for a fair online tax policy. Merchants also gathered in Memphis, Chattanooga, Knoxville, Oak Ridge and Johnson City. They heard from both Senator Lamar Alexander, who is sponsoring a bill to close the online tax loophole and Governor Bill Haslam who supports the legislation.

“This legislation would give states the ability to close the online sales-tax loophole, created when out-of-state sellers don’t collect, and purchasers don’t pay, the state sales tax – even though they still owe it. This loophole subsidizes out-of-state businesses at the expense of Tennessee businesses and subsidizes some taxpayers at the expense of others. Tennessee is losing hundreds of millions of dollars that could be used to improve services or avoid a state income tax. The legislation addresses a states’ rights issue: preserving the right of states to collect – or to decide not to collect – taxes that are already owed under state law.”

“Tennessee’s brick and mortar retailers are significant investors here, employing thousands of Tennesseans, and as a state that relies heavily on sales tax revenue, we must focus on maintaining a healthy and competitive environment to grow Tennessee jobs,” Haslam said. “I appreciate Sen. Alexander’s leadership along with the support from members of our congressional delegation to find a national solution as we work to become the No. 1 location in the Southeast for high quality jobs.”

Support for the federal legislation to close the sales tax loophole is widespread. Senator Bob Corker is a co-sponsor of the Senate bill. In the House, both Reps. Steve Cohen and John Duncan Jr. are co-sponsors of a similar bill. Metro Mayor Karl Dean has voiced support along with Memphis Mayor AC Wharton, Knoxville Mayor Madeline Rogero, Knox County Mayor Tim Burchett, Chattanooga Mayor Ron Littlefield, Hamilton County Mayor Jim Coppinger and Mayor Tom Beehan of Oak Ridge. The legislation also has the support of the chambers of commerce in Knoxville, Memphis, Chattanooga, Oak Ridge and Johnson City, with more endorsements expected.

The Alliance for Main Street Fairness includes businesses all across the state. The steering committee will focus on generating even more support for online fairness and making sure that support is communicated to the Congressional delegation.

An online piracy measure passed into state law last year will be debated again this legislative session, in an effort to exclude a provision that made it unlawful for people to share passwords for accounts like Netflix and Pandora with their family.

House Majority Leader Gerald McCormick, R-Chattanooga, has indicated he plans to reintroduce the concept in committee in the next few weeks so that lawmakers can clean up the confusing language.

“The intent of it, and hopefully the final result, will be that people can share passwords if they’re family members and that type thing,” McCormick said. “But we can keep it illegal to get those passwords and just send it out to hundreds of people or thousands of people, either to make money off of it, or just to steal the work of the songwriters.”

That’s how the measure was pitched to state lawmakers last year by a lobbyist for the Recording Industry Association of America. McCormick said he was not presented evidence during those hearings of such widespread theft, but that the industry said its aim was to get ahead of any potential problem — as it had failed to do in the late 1990s when file-sharing sites like Napster surged.

McCormick said his aim was to protect Nashville’s recording industry from theft of its intellectual property.

“Actually it wasn’t a Netflix bill,” McCormick said. “It was for the recording industry. We’re trying to discourage people from stealing songwriter’s property.

“I never even thought about Netflix until I started getting e-mails from all over the world.”

McCormick said he realizes a bill to deal with subscription services may not be necessary because companies such as Netflix already have certain safeguards and contractual language in place to restrict use of the content.

“We mess up, too. Sometimes we have to go back and fix our mistakes, and that’s what we’re doing here,” McCormick said.

Dolly Parton is planning to build the nation’s first snow and water park in Nashville, and taxpayers are going to help foot the bill — an unknown amount about which officials hemmed and hawed at a Thursday announcement.

Gov. Bill Haslam is promising Parton new road turnoffs and infrastructure grants for the country music star’s new amusement park planned to open summer 2014 in Nashville. Haslam said he didn’t know how much the state’s total incentive package for the new park would cost taxpayers.

Nashville Mayor Karl Dean also signaled city support for marketing and infrastructure but, similarly, did not elaborate.

The amusement park, a product of Gaylord Entertainment Co. and Parton’s Dollywood Company, is so far unnamed, but officials said they believe the $50 million project will attract some half million visitors in its first 12 months of operation at a site near the Gaylord Opryland hotel off Briley Parkway. Parton and Gaylord CEO Collin Reed say it would create 450 jobs.

“If you think about it, the state lives off of sales tax,” Haslam told reporters after palling around onstage with Parton at the Grand Ole Opry. “And there’s no question this is something that’s going to draw people from outside the state, so I do think it’ll mean new dollars for Tennessee.”

Haslam said the development would build on the state’s tourism industry, one of the largest moneymakers in the state.

In addition to road work, the project will qualify for state FastTrack Infrastructure Development grants, Haslam said. Those are the same kind of grants that the state used to reel in companies like Volkswagen in Chattanooga.

Haslam said he wasn’t sure whether the project would qualify for an expansion of that program he has pitched this year. Haslam’s plan — SB 2206 — would specify that “funds be used in exceptional circumstances when the funds will make a proportionally significant economic impact on the affected community.”

If the state were to implement mandatory drug testing for welfare recipients — an idea Lt. Gov. Ron Ramsey is pushing — it would be a higher standard than the state demands for most of its own workers.

“I still want to make sure we’re drug testing practically everyone getting any kind of government benefits,” Ramsey told reporters last week.

Meanwhile, no state agencies participate in a program promoted to businesses by the Tennessee Department of Labor as effective in keeping workplaces safe and productivity up.

The “Drug Free Workplace Program,” in which businesses get a 5 percent break on worker’s compensation premiums in exchange for testing workers, enlists businesses and local governments to test all workers prior to employment, as well as employees involved in workplace accidents.

In general, though, most of the state’s 46,000 employees don’t have to provide urine samples as a condition of accepting a job, according to state labor department spokesman Jeff Hentschel.

Normally, only those state employees with safety-sensitive jobs are required to submit to drug tests. In the agency that runs the prison system, all employees are tested, but in a handful of other departments — such as Commerce and Insurance, Agriculture, and Intellectual and Developmental Disabilities — only workers who handle heavy machinery or perform potentially dangerous work tasks are tested, according to several agency spokespeople contacted by TNReport.

Ramsey could support requiring state employees to undergo testing, a spokesman said. Based on legislative research from last year that estimated the tests cost at least $8 a pop, a bill for such a measure could easily top $360,000 to test each of the state’s 46,000 employees, although that doesn’t account for costs like supplies, training, retesting and staffing. A proposal last year to drug test welfare recipients yielded a $2.3 million price tag the first year.

When asked by reporters, Ramsey said he’d also be in support of drug testing lawmakers and would probably back requiring business executives whose companies are receiving government handouts to submit to a test.

“Fine with me. I’ll have to check into that,” Ramsey said. “I’m fine with that. I’m fine with legislators being drug tested because I know that we’ll get criticised if we target one segment of society like that.

“But you’re right. If they’re getting state money, federal money, why shouldn’t they be? I don’t know how you define who the executives are.”

A plan by Knoxville Republicans Sen. Stacey Campfield and Rep. Bill Dunn requiring welfare recipients to submit to drug tests stalled last year, but Ramsey is breathing new life into the concept, although he hasn’t backed specific legislation, yet. Similar programs around the country have faced legal challenges.

Gov. Bill Haslam and House Speaker Beth Harwell say they want to see the bottom line before they weigh in.

“What’s the cost, and who’s going to pay for it? So until you answer those, I think it’d be too early for me to say that,” Haslam told TNReport Monday when asked whether he supports drug testing any level of government beneficiaries. “It’s awful early. Let’s ask some of those questions. If it’s fair for folks receiving benefits, is it also fair for state employees, and what kind of cost you’re talking about?”

Alex Harris contributed to this report. 

Hitting on themes favorable to Tennessee’s Republican leadership, the state’s chapter of the National Federation of Independent Business has unveiled a 2012 legislative agenda aimed at trimming regulations and tightening the laws around unemployment and workers’ compensation benefits.

The group also expressed support for cuts in the state’s inheritance tax, a policy pushed by the governor in his legislative package, and said they are evaluating proposals around tort reform — following a year in which the Legislature enacted limits on noneconomic and punitive damages in civil cases.

The agenda would seem to be landing on soft ground, given that a business-friendly legislature arrives politically unchanged this session. Last year, a Republican task force charged with identifying ways to make Tennessee more attractive to businesses made several similar, albeit general, recommendations, including workers’ comp modifications and the reduction or elimination of business regulations.

NFIB State Director Jim Brown echoed calls from Lt. Gov. Ron Ramsey for tighter work search requirements for Tennesseans receiving unemployment benefits. Citing a survey sent to NFIB members, Brown said there is broad support for adopting a law similar to one in Florida, which requires beneficiaries to list five employers to which they’ve applied or to report weekly to a one-stop career center.

Ramsey has said that “it’s too easy just to click a mouse and say you’re just looking for a job.”

Brown says the federation has heard stories of employers being turned down by applicants who want to use up their remaining unemployment benefits.

“We heard this everywhere we went: Employers will offer someone a job, and the response is, ‘Will the job be available in five weeks?’” he said. The NFIB partnered with Ramsey last year on his Red Tape Road Trips, during which the lieutenant governor met with business owners to discuss their interactions with the state government.

Details on how such issues will play out in legislation were few, as legislators this week were still trying to get out from under the redistricting process.

House Democratic Caucus Chairman Rep. Mike Turner, of Old Hickory, said he hadn’t yet seen the NFIB’s agenda. Shown the list by a reporter, he said, “It looks like they’re piling on working families.”

After noting the small number of Tennesseans affected by cuts in the state’s estate tax, he added, “They’re talking about the 1 percent again.”

The estate tax provision in the law carries an exemption for estates up to $1 million, and Haslam has proposed lifting that to $1.25 million.

On the issue of worker’s comp, the federation says it has found “the time to adjudicate claims is lengthy and delays return to work and payment of claims.”

It’s an issue of interest to Rep. Pat Marsh, R-Shelbyville, who owns the Big G Express trucking company. But after years of meeting with other business owners and representatives from the insurance industry, and experience with injured workers in his own business, Marsh said he’s learned that it’s a complicated issue.

“I’ve met with these guys the last two years, and we haven’t come up with anything,” he said. “I’m finding out the more I dig into it, that it’s not so simple.”

One difficult hurdle, he said, is how to root out fraud when it comes to workers’ comp claims, an occurrence which Marsh characterized as not uncommon but tough to legislate against. Another is the debate between leaving workers’ comp cases in the courts or moving to an administrative system, which would require a commission to hear cases. Marsh said it would be a challenge to create a commission that could be objective.

Haslam has so far not signaled that he is taking up workers’ comp this session. His legislative package centered on cutting estate and sales taxes, restructuring certain state boards and expanding a business grant program, as well as proposals aimed at injecting merit as more of a factor in hiring and promotion decisions in local schools and state government.

The NFIB is also targeting what it believes are unnecessary procedures around professional licensing by looking at other states’ requirements. In Tennessee, there are 111 professions that require licensing, which Brown said is more than any other southern state except for Arkansas.

As an example of requirements the group will be looking to repeal or oppose this session, Brown cited a failed plan, which had lingered around the Hill for several years, that would have required a state license for interior designers.

Press Release from Gov. Bill Haslam; Jan. 10, 2012:

I hope you all had a relaxing and enjoyable holiday season. While Crissy and I are excited to be back in Nashville and working towards moving Tennessee forward, we really enjoyed spending some time with our kids, family and friends.

As you may know, today marks the start of this year’s legislative session. And just a few minutes ago in the Old Supreme Court Chambers, I announced my 2012 legislative package aimed at moving Tennessee forward. This year, my focus remains: working to make Tennessee the No. 1 state in the Southeast for high quality jobs. We hope to get closer to this goal through economic development efforts, meaningful education reform, a more efficient and effective state government and improved public safety. Our 2012 legislative package is aimed at impacting key issues that are absolutely crucial to tackle now. Here’s a sampling of these issues:

• Strengthening the Department of Economic and Community Development’s FastTrack program by budgeting more for the grant program and giving the department more flexibility in utilizing those grants to attract and grow Tennessee jobs
• Lowering the state portion of the sales tax on food from 5.5 percent to 5.0 percent over three years.
• Providing innovation opportunities to local school districts by eliminating the outdated requirement of state and local salary schedules based strictly on seniority and training.
• Taking a first step in reaching my goal of raising the state’s inheritance tax exemption from $1 million to $5 million by increasing it to $1.25 million to lower the burden on family farmers and family business owners as these businesses span generations.
• Restructuring a number of state boards and commissions to eliminate duplicative functions and provide more accountability and oversight of these agencies
• Addressing a number of public safety issues including prescription drug abuse, tougher sentencing for certain types of gang-related crimes, tougher sentencing for gun possession by those with prior violent felony convictions and mandatory jail time for repeat domestic violence offenders
• Updating and reforming the state’s antiquated employment system through the TEAM Act (Tennessee Excellence Accountability and Management) by simplifying the hiring process, providing flexibility to retain and reward outstanding employees and streamlining the appeals process for employees. Watch a video detailing some of the employment issues facing the state »

These examples just scratch the surface of what we’re working on in 2012. I hope you’ll visit forward.tn.gov to learn more and watch a video about some of the issues with our state’s employment system. Thanks so much for your support and please feel free to share your feedback.

Best,

Bill

Tennessee’s presiding state House lawmaker anticipates a fruitful legislative session for Republicans in 2012, especially for one in particular: Gov. Bill Haslam.

“We have a wonderful new governor who has a commitment to the state of Tennessee,” Beth Harwell, R-Nashville, told reporters Tuesday after the lower chamber’s opening act for the year. “We are going to make sure that he is able to fulfill that by carrying through with his legislative agenda.”

Harwell predicts “a productive, good session” for Republican interests in general.

“We are committed to the goals we’ve set out for our party and for the state,” she said.

Harwell continued, “My most number-one concern is always the economy, and making sure this is the most business-friendly state that exists in the United States.” The speaker said keeping taxes low, if not actually reducing them, is a priority for her.

Harwell also said she’ll be making efforts to work with Democrats to find common ground when possible.

“We will have our differences, but that is what the legislative process is ultimately about,” said Speaker Harwell. “But at the end of the day, I am always so impressed that this body does come together to do what is best for Tennessee, unlike Washington, D.C., that is just mired in gridlock and can’t accomplish anything. We have a good reputation in this state legislature for accomplishing our goals and adjourning in a timely fashion.”

House Democratic Leader Craig Fitzhugh, whose party is outnumbered 64-34 by GOP lawmakers, said his caucus will be trying to use their limited political clout to push the conversation toward job creation initiatives whenever they can.

Fitzhugh also said Democrats will be advocating a cut in the state’s lofty sales tax on groceries, even though Republicans have said their tax-cut priorities lie elsewhere, like reducing the Hall income tax or the estate tax.

“(Job creation) is still the main issue in our state,” said Fitzhugh. “We have some ideas that hopefully can gain some support across the board that will help ramp up jobs and keep the economy growing.”

Davidson County’s district attorney general on Monday defended probing two state lawmakers for political wrongdoing, even after an investigation by Tennessee’s most powerful law enforcement agency revealed nothing deemed worthy of criminal prosecution.

Victor S. “Torry” Johnson III told reporters Monday that Reps. Tony Shipley, R-Kingsport, and Dale Ford, R-Jonesborough, were “particularly heavy handed” in convincing the state nursing board to reverse disciplinary action against three nurses, but they broke no laws.

“Where it gets complicated is it’s a free country,” District Attorney General Johnson told reporters in his Nashville office.

“They are legislators, and they can certainly make inquiries, but it seems to me there’s a fine line about where you make inquiries and where maybe you are overstepping what ought to be your proper role as a legislator and really try to force a conclusion and override what really is the process that is in place to protect the public.”

He continued, “When you start introducing legislation, or interfere with legislation that might lead to the reauthorization of the board, or when you file legislation to provide that the legislature somehow would oversee these things, that just seems to me you’re using legislation as sort of a club.”

The Tennessee Bureau of Investigation launched an inquiry on June 22 into the two lawmakers and employees within the state Health Department to determine if they had committed any crimes, including misconduct and false reporting, in pressuring the Nursing Board to revisit their decision to discipline the nurse practitioners.

The three had been accused of over-prescribing medications contributing to the death of patients at the now-defunct Appalachian Medical Center in Johnson City.

Shipley and Ford have each acknowledged filing or supporting legislation to alter the board makeup or its oversight, or moving to shut the board down in an effort to convince the body to reconsider its actions. Both lawmakers have consistently maintained they did nothing wrong.

Ultimately, disciplinary actions against the nurses were reversed, although the TBI has yet to close its investigation into the actions of the three nurses.

Now that the district attorney has concluded there are no criminal charges to file, Shipley says he wants a legislative probe into where the original complaints came from and whether the state could pursue charges against the individuals who issued “fabricated” allegations.

“It had to be exaggerated in order to get the district attorney to act, and it’s just unfortunate that these people have wasted thousands of dollars of the taxpayer’s money by having this investigation,” Shipley told TNReport.

“So we’re going to inquire as to the cost and time spent by TBI and the DAs office and all that. I think as a minimum, the person who orchestrated this ought to reimburse the state for the expenses we incurred,” he added. ”In a pre-election year when we’re trying to raise money, raising the concerns about the ethics of legislators, it’s not a healthy thing for us, and I intend for it to not be a healthy thing for the person that did it, if I can figure out who did it.”

Johnson said he has no intention to go after anyone who filed complaints against the two legislators.

“Nothing that I’m saying says it (was) a false complaint,” said Johnson. “In the end, I did not feel that the activities of the legislators — while I’ve obviously been critical of them  — I didn’t think they amounted to a crime. But that doesn’t mean that the initial complaints were false.”