Amazon.com won another battle in its e-commerce war against Mainstreet retailers last month. South Carolina gave the online giant a $5 million building site, a property tax break and a series of other tax credits and exemptions worth tens of millions in exchange for the jobs Amazon promised to bring in setting up a distribution center there. The wrangling over the deal pitted business interests against business interests and conflicted state lawmakers, including GOP Governor Nikki Haley, who in the end backed off early opposition. It’s a battle that has been waged in states around the country over the past few years and, in a lesser form, here in Colorado.
The main break the South Carolina legislature granted Amazon comes in the form of a five-year exemption from collecting sales tax on merchandise that would pass through the planned distribution center and on merchandise sold to South Carolina customers. Officials put the cost to state coffers of those exemptions alone at roughly $10 million to $15 million.
Debate over the deal has been going on for years and has seen support see-saw. The state House, like Gov. Haley, originally opposed the deal.
As Stateline reports, when push came to shove, however, Amazon out lobbied major brick-and-mortar competitors like Wal-Mart, Target, Best Buy and Home Depot. Amazon also overran the influence of the state chamber of commerce by promising more jobs for South Carolinans– as many as 2000– and offering to pay a larger share of startup or investment costs.
Haley agreed to the deal, even though she said she thought it was bad policy.
“Don’t ask us to give you sales tax relief when we’re not giving it to the bookstore down the street; or we’re not giving it to the other stores on the other side of town,” she told Amazon early in the negotiations. “It’s just not a level playing field.”
Haley didn’t sign the bill that made the deal but agreed not to veto it.
According to Stateline, the state commerce department projected Amazon will receive roughly $25 million over the next decade in tax credits, but it also estimated the deal would yield the state a net gain of $1.7 billion in the same time frame.
The South Carolina battle highlights the kind of pressure Amazon can bring to state lawmakers facing strapped budgets and it amplifies calls for federal intervention.
Last year, Colorado lawmakers looking to make up historic revenue shortfalls, passed an “Amazon tax” that sought to force online retailers doing business in the state to collect state sales tax.
In retaliation, Amazon stripped business from its Colorado affiliates, or website operators who win small commissions by referring websurfers to buy goods at Amazon.
A U.S. District Court judge in Denver issued an injunction at the end of January against the Amazon tax. The judge ruled the law was discriminatory because it would impose a burden on interstate commerce not imposed on in-state commerce.
