Amazon not giving up

The Amazon.com lobbyists must be busy working the phones to our state legislators and emailing them copies of the story in Saturday’s State. “Amazon vote drives off two firms”, screams the headline.

The story goes on to quote Lexington County leaders who have been at the fore front in pushing for Amazon.com to be the only retailer in the state not to have to collect sales tax on in-state sales. Not one dissenting point of view was included as you would expect in a news story. Not one. Amazon couldn’t have paid for better one-sided news coverage.

In my blog on Thursday I said, “Now attention must be paid to the Senate. Amazon.com hasn’t been paying possibly six digit fees to lobbyists just to give up as long as the legislature still has a breath of life this session.” Saturday’s front page story tells me that I was correct.

But let’s make sure we all know what the Amazon proponents actually said in the story. One potential manufacturing prospect for Lexington County is “abandoning consideration”. The other was led to “suspend interest” several weeks ago because of the controversy. Neither of these prospects were in the bag as we thought Amazon was. This might simply have been a convenient excuse for the prospects to say no to Lexington County because it sure wasn’t because the state and county didn’t deliver on everything they promised in writing to Amazon.

And while we were all embroiled in battle here with Amazon, Wall Street didn’t care. The company’s stock rose 7.9 percent to reach an all-time high the same day our House voted down the sweetheart sales tax deal. According to a Seattle Times story, the jump in stock price was because investors approved of the company’s efforts to “grab a bigger share of the e-commerce market.”

And how is Amazon grabbing a bigger share of the market? By bullying states like South Carolina into giving them an unfair competitive advantage over the state’s existing brick-and-more and online stores that have to collect sales tax on in-state sales.

The House vote on Wednesday wasn’t only important for fairness to our existing small businesses, it was also important to the national effort to force all online retailers to collect sales tax regardless of the location of the customer.

Jeff Milchen, co-founder of the American Independent Business Alliance, in his commentary in the April 28th issue of Business Week recognizes South Carolina’s courageous stand against Amazon.com.

(S)state bills closing the Amazon loophole do help level the playing field for many businesses and build momentum for needed national reform such as that proposed by Senators Dick Durbin (D-Ill.) and Mike Enzi (R-Wyo.), who plan to reintroduce the "Main Street Fairness Act" during the current session. Their bill would ratify the Streamlined Sales and Use Tax Agreement, a compact developed by a coalition of state government representatives to harmonize sales tax policies. The bill also would give states the authority to collect tax on interstate sales under these simplified rules.

South Carolina should be proud of taking a leading role in leveling the playing field for all retailers. Let’s not succumb to hyperventilating about possible prospect losses and instead listen to our Commerce secretary, Bobby Hitt.

South Carolina, like our neighboring states, has similar incentives for new and expanding businesses. Incentives are but one of the reasons that companies choose to locate or expand in our state. South Carolina continues to be a national leader in work force development and has one of the most business-friendly climates in the country. A dispute over a sales tax exemption will not change the state’s international and national reputations as a desirable business location.

House stands with state’s small businesses

Congratulations to the South Carolina House!

Yesterday after nearly two hours of hot debate, Representatives voted not to give Amazon.com an exemption from collecting sales tax on in-state purchases. The vote turned out not to be even close.

A clear bi-partisan majority in the House established a new principle for the state’s big business recruitment efforts—do no harm to our existing small businesses.

That was the underlying problem with the Amazon.com sales tax deal. All month we and other business organizations have been saying that exempting Amazon.com from collecting sales tax would give it an unfair competitive advantage over our existing brick-and-mortar and online businesses. (Check out my WIS-TV editorial that ran yesterday afternoon before and during the floor debate.)

The Amazon.com supporters tried to change the subject to one of honoring our promise to Amazon.com to give them the sales tax deal. But no such contractual promise was ever given to Amazon.com.

In response to yesterday’s vote, Amazon.com announced that it was pulling out of building a distribution center in Lexington County. This could be a ploy to scare the legislature into yet giving in. Or it could be a clear indication that Amazon.com is not the corporate citizen we want here. One that either gets its way 100% or takes off for greener pastures.

If it’s the former, the House should not flinch and the Senate shouldn’t tremble because Amazon.com will eventually keep their contractual promise to build. If it’s the latter, our state will survive without Amazon.com and our ability to recruit business will be just fine. We’ll see Amazon.com in court to recover the tangible property already given to the company as part of the contractual incentive.

Comments reported in The State today from a Lexington County official are clearly over the top predicting that “It’s like no one will even look at coming here for 10 years.” You’d think that Sherman burned Columbia and Lexington again yesterday.

However, at the exact same time some legislators were predicting recruitment impotence yesterday if we turn down Amazon.com’s sweetheart sales tax deal, I received the S.C. Department of Commerce’s weekly e-newsletter, Commerce Communications. (I encourage you to sign up for this well designed, clearly written and informative publication.)

In the last 3 issues of this e-newsletter Commerce has announced six new or expanding businesses planning to invest $53.3 million and creating 568 new jobs in the state. Does anyone really believe that this kind of success is going to come to a grinding halt because Amazon.com couldn’t bully the South Carolina House into dropping our collective pants?

Of course not.

Now attention must be paid to the Senate. Amazon.com hasn’t been paying possibly six digit fees to lobbyists just to give up as long as the legislature still has a breath of life this session.

Amazon will build in Lexington Co. without tax deal or we'll see them in court

It’s not often in a political debate that a key argument of one side gets exposed as a complete fraud. This is one of those rare times.

From the beginning of the Amazon.com controversy it was almost universally accepted that giving the company an exemption from collecting sales tax from in-state sales was a bad deal for all our other small retailers that compete with the online giant. And trying to help the economy of one county at the expense of small businesses across the state is simply not fair.

As one state Senator told me, “Frank, you’re probably right about everything but we made a promise that we have to honor.” For the opponents of the Amazon.com deal this has been the hardest objection to overcome even though we always believed that the only promise made was to try to get the tax deal approved by the Legislature. I, and probably most of you, had not seen the tangible evidence of our suspicion until now.

On December 23, 2010, the South Carolina Department of Commerce (DOC) and the South Carolina Coordination Council for Economic Development entered into an Incentive and Inducement Agreement with Amazon.com. Here is article 3.1.3 of that agreement.

3.1.3 Nexus Safe harbor Legislation. Section 12-6-60 of the Code of laws of South Carolina, 1976, as amended (the “SC. Code”), provided that owning or utilizing a distribution facility (as defined therein) within the State would not be considered in determining whether the company has nexus with the State for income tax, corporate license fee or sales tax purposes. However, this provision was repealed for tax years beginning after June 9, 2010. Subject to available resources and to the extent permitted by law, DOC agrees to use its good faith, best efforts to obtain legislation to renew and extend the nexus safe harbor provision.

The State of South Carolina did not “promise” to give Amazon.com the sales tax deal. (Read Cindi Scoppe’s editorial in today’s The State.)

In the competitive world of business recruitment, the contract is everything. If the promise is not on paper and signed, it doesn’t exist. Amazon.com knows that. Commerce knows that. The Senate (which has seen this Agreement) knows that. The House knows that. And most importantly the courts know that.

South Carolina has and will deliver everything we actually promised Amazon.com including the Department of Commerce’s “good faith, best efforts” to secure the sales tax deal. But when the Legislature does the right thing by turning down this request, Amazon.com will still build the distribution center in Lexington County….because that’s what they promised.

Amazon.com wins round 1

The Senate Finance Committee room was packed yesterday by Lexington County supporters of Amazon.com’s request to be exempted from collecting sales tax for sales made to South Carolina residents in exchange for building a new distribution center in that county. The room was also filled with lobbyists hired by Amazon.com to move its legislation forward.

In the end, as expected, the Committee voted 15-5 in favor of by-passing the subcommittee process (that would give the public a chance to voice their opinion) and sending the bill to the Senate floor. In addition to the Senator’s representing Lexington County sponsoring the bill, the Committee’s chairman also added his name and an amendment to give QVC in Florence County another five year corporate income tax pass. It’s hard to vote against the Chairman in this situation so hats off to the five courageous Senators who did.

Below is my letter being delivered to one of those courageous Senators, Danny Verdin. The fight for small businesses goes on.

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April 20, 2011

The Honorable Danny Verdin
South Carolina Senate
404 Gressette Building
Columbia, SC

Re: S.808, Sales Tax Collection Exemption for Amazon.com

Dear Senator Verdin,

Thank you for your insightful questions at yesterday’s Senate Finance Committee regarding the above referenced bill.

You correctly asked what the original motivation was for Amazon.com to demand that it be exempted from collecting sales tax on sales made to South Carolina residents. The answer can clearly be found on page 14 of Amazon’s 2008 Annual Report (see enclosed).

In that report Amazon.com lays out why it must have an exemption from collecting state sales tax.

A successful assertion by one or more states or foreign countries that we should collect sales or other taxes on the sale of merchandise or services could result in substantial tax liabilities for past sales, decrease our ability to compete with traditional retailers, and otherwise harm our business.

We don’t often have such an honest admission from big businesses for the incentives they seek. However, their openness does not change the fact that granting their demand is unfair to all the state’s small businesses, brick-and-mortar and online, that would be competitively disadvantaged.

While we appreciate the issue of trying to uphold an offer made in negotiations with Amazon.com, this is a particularly unique case that, we don’t believe, will shut down the state’s efforts to recruit businesses utilizing more routine incentives.

Sincerely,

Frank Knapp, Jr.
President & CEO