CORRECTION paragraph five: The tax incentive Amazon has requested would exempt the company from collecting sales tax on goods shipped to S.C. addresses. The company does not have to collect sales tax on orders shipped to other states.
Online retailer Amazon.com pressed S.C. lawmakers Wednesday for a sales tax break for the distribution center that it is building near Cayce, amid concern that denying the incentive could jeopardize the $100 million project.
Amazon executives warned refusing the tax break is a deal-breaker for the project, projected to employ 1,249 full time by 2013 and provide up to 2,500 part-time jobs, some legislators and Lexington County officials said.
“The implication is if they don’t get it, they’ll pull out,” said House Majority Leader Kenny Bingham, R-Lexington. “That’s clearly an option they will look at if they do not get it.”
That warning came after the tax break was not included in a package of economic incentives approved Tuesday by the Senate Finance Committee. The tax break could be added later or attached to other proposals before lawmakers end their work in early June.
The tax incentive Amazon has requested would exempt the company from collecting sales tax on goods shipped to S.C. addresses. The company does not have to collect sales tax on orders shipped to other states.
Amazon also is resisting attempts to tax goods sold from distribution centers that it operates in other states.
“This is a national standoff,” said Lexington County Councilman Bill Banning of West Columbia. “They picked South Carolina for a fight.”
State Commerce Department officials promised to seek the tax break as part of a deal, brokered in December under then-Gov. Mark Sanford, that led Amazon to announce it would open the center.
But while they agreed to seek the tax break, Commerce officials did not promise the incentive.
A copy of the state’s agreement with Amazon, provided by Commerce officials, says the agency “promises to use its good faith, best efforts to obtain legislation to renew and extend the nexus safe harbor provision” that would exempt Amazon from collecting tax on out-of-state sales.
“We can’t make a promise,” Commerce spokeswoman Kara Borie said of securing legislative approval for the tax break. “We have reached out to the Legislature.”
No price tag for the tax break has been made public.
However, Borie said an agency cost-benefit analysis shows the taxes generated by the new jobs, property and other benefits associated with the Amazon project easily would outweigh the revenue lost by the sales tax exemption.
Some lawmakers said Wednesday that they think it’s vital to approve the tax break despite the state’s $700 million shortfall in revenue that is causing cuts in many state services.
“It’s a promise (by Commerce) that we need to keep,” said House Ways and Means chairman Dan Cooper, R-Anderson. “If we don’t, it will burn us in the very competitive world of economic development.”
But other legislative leaders — including Senate Finance chairman Hugh Leatherman, R-Florence, and Senate President Pro Tem Glenn McConnell, R-Charleston — said they have not been asked to introduce legislation approving the tax break by either Commerce officials or Amazon.
McConnell said there is skepticism about providing a tax break that allows Amazon an advantage over its competitors.
The tax break is opposed by Best Buy, Walmart and smaller local retailers that compete with Amazon but do not get the tax break.
The tax break would be on top of other state and local incentives — most of them common for companies bringing in large numbers of jobs — already promised or given Amazon. Those incentives include:
• Repeal of Lexington County’s local restrictions on Sunday sales, a move made to facilitate Amazon’s planned round-the-clock operation
• A site valued at $4 million that was given to the company for free
• Lower property taxes on the site. The center will be assessed for tax purposes at 6 percent of its value for 20 years, instead of the usual 10.5 percent.
• State tax credits of up to $3,250 a year for 10 years for each job created. Amazon has said its pay in Lexington County would start at $15 an hour.
Amazon officials could not be reached for comment.
County Councilman Johnny Jeffcoat of Irmo, who escorted Amazon executive Fred Kaga around the State House on Wednesday, predicted a tug of war over the proposal.
“I don’t think it’s going to have an easy ride,” he said of the proposal.
Banning said Amazon soon could “pull the plug” on the Lexington facility over what company officials consider a broken promise.
Much of the problem, Banning said, is confusion about the need for the tax break. That confusion stems from the failure of Sanford’s aides and Commerce Department team to consult top lawmakers before the two-term governor left office in January, Banning said.
Work on the steel frame of the Amazon center, now under way, could halt as soon as mid-April unless lawmakers take steps to deliver the deal, Banning said.
“It’s a big mess. It’s a big debacle,” he said. “I’m past crossing my fingers. I’m holding my breath.”