South Carolina lawmakers' decision to deny a sales tax break for online retailer Amazon.com will cost Lexington County more than 1,200 jobs, but the effects could ripple across the state.
Some say the incentives were unfair to established brick-and-mortar retailers while others maintain the reneged deal will cause other industries to pause before bringing their business to South Carolina.
Amazon.com decided after the vote to cancel $52 million in procurement contracts and remove all job postings from its website for the Midlands plant, effectively saying goodbye to South Carolina.
That did little to change Gov. Nikki Haley's stance, and she applauded the House's 71-47 decision in a visit to Charleston on Thursday.
'When you come to South Carolina, we're going to give you a fair competitive marketplace to do business, and we're always going to take care of businesses that are in town,' she said. 'By allowing Amazon to get a tax break that we're not giving to any other business in our state destroys what I am saying.'
Haley said retail is different from manufacturing because its jobs are subject to higher turnover and lower pay. 'It is not a Boeing. It is not a BMW,' she said during the Free Enterprise Foundation's awards luncheon at The Citadel.
Haley criticized Gov. Mark Sanford's administration, though not by name, for striking the Amazon deal.
'You will not see an Amazon situation in the Haley administration,' she said. 'I was not involved in the agreement. I did not know about the agreement,' which she called 'dangerous.'
Haley said she hopes Amazon
will still do business in South Carolina 'but we want them to do it on a level playing field.' She said she has not talked to company officials since the vote.
Commerce Secretary Bobby Hitt, appointed by Haley, said the dispute will not affect the state's ability to recruit industry.
'The fate of the Amazon project was tied to an emerging public view that businesses deserve a level playing field on matters of tax policy, especially sales tax policy,' he said in a statement Thursday. 'The Haley administration is committed to fair tax treatment for all businesses in South Carolina. ... A dispute over a sales tax exemption will not change the state's international and national reputations as a desirable business location.'
Explaining their votes
Isle of Palms Republican Mike Sottile partially blamed the governor, who represented Lexington County when she was in the House, for the loss of Amazon.
She had said she did not support the tax break but would let it become law if legislators approved it.
'It's unfortunate that Gov. Haley didn't come in and say, ‘Do this or don't do this.' She was kind of sitting in the middle,' Sottile said. 'The governor made it a tough decision whether you voted for it or not.'
Sottile's decision to support the tax break was about jobs and not breaking promises, he said.
'The state had made a commitment to Amazon even though it was under a previous governor,' Sottile said.
Rep. Wendell Gilliard voted with the majority against the Amazon tax break, saying the state can't afford it.
'There comes a time and a point when you have to put a stop to all of these tax exemptions for these multimillion dollar businesses,' the Charleston Democrat said.
As for the Commerce Department, he added, 'They made a deal that shouldn't have ever been made. It's almost like now the state is being held hostage. ‘If you don't do this, we are going to pull out.' Other businesses are going to come anyway just like they have done in the past.'
Charleston Republican Chip Limehouse called it a very difficult decision, but he voted against the sales tax exemption as well.
'Government should not be in the business of picking winners and losers, but our in-state retailers are at a competitive disadvantage with an Internet supplier that doesn't have to pay sales tax,' Limehouse said. 'It hurts me to lose the jobs in Lexington County ... however, at the end of the day you can't pick and choose which laws apply to people and which ones don't.'
He added, 'If the Commerce Department is going to make out promises then they ought to have some sort of blessing from the Legislature. I had never had any communications with anyone at Commerce.'
Cause and effect
Frank Knapp, president and CEO of the S.C. Small Business Chamber of Commerce, hailed the decision as a victory for small businesses.
'A clear bipartisan majority in the House established a new principle for the state's big business recruitment efforts — do no harm to our existing small businesses,' he said on his blog. 'That was the underlying problem with the Amazon.com sales tax deal.'
The overarching issue in the Amazon case is that Internet sales result in the losses of legitimate revenues to the state, said Bruce Yandle, dean emeritus of Clemson University's College of Business and Behavioral Science.
'There is no doubt leakage' of those revenues, he said.
And not having to collect sales taxes 'does give an advantage to the Internet seller as compared with Main Street merchants,' he said.
The decision to deny Amazon a break in the collection of sales tax is signaling to other Internet merchants who are looking to locate distribution centers that 'you'd better look somewhere else,' he said.
Losing 1,200 jobs would be a blow to the state.
'Warehousing jobs may pay less than South Carolina's average wage of $16 an hour, but they provide good jobs in some counties and for people with less technical education. Logistics distribution makes sense for South Carolina at this time in our evolution,' he said.
The S.C. Economic Developers' Association called the vote disappointing.
'We were fully committed to the project and supported the Department of Commerce's efforts,' SCEDA vice president Heather Simmons Jones said.
Robert Behre and The Greenville News contributed to this report. Reach Warren L. Wise at 937-5524.