Amazon agrees to collect tax on sales in Tennessee from January 2014

Online retail giant Amazon has agreed to collect sales tax from its customers in Tennessee from 1 January 2014, in exchange for support from the government for its distribution centres in the state.

Tennessee's republican governor Bill Haslam signed an agreement with Paul Misener, vice-president, global public policy, Amazon, enabling the retailer to collect sales-tax from its customers in the state.

''The agreement balances meeting the needs of the company and the needs of the state by providing certainty to Amazon and brick-and-mortar retailers in Tennessee,'' said Haslam. Collecting taxes on online commerce has emerged as a major issue, with brick-and-mortar retailers lashing out at governments for their failure to charge tax on online sales.

Online retailers like Amazon argue that collecting sales tax is not their responsibility. The US Supreme Court has also ruled that catalogue companies do not have to collect state sales tax unless they have a physical presence such as retail outlet or an office in the state.

''The sales tax issue must be resolved in Congress,'' says Misener. ''It's the only way the state of Tennessee will be able to obtain all of the sales tax revenue that can be collected for the state.''

However, both large and small retailers in the state are opposed to Amazon being granted time till 2014.