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UPDATE: Amazon sues N.C. for demanding customer info

Update at 9 p.m. EST with comments by North Carolina's secretary of the Department of Revenue, disputing Amazon's claims that it sought information on book titles.

Amazon.com filed a suit against North Carolina tax authorities who have asked for the names of customers in the state and the books they have bought from the online retailer since 2003. The state, however, disputed the allegations, saying it never specifically requested for book titles in its audit of the online retailer.

The request, made in January, was part of an audit for taxes by the North Carolina Department of Revenue. But the Seattle-based e-bookseller protested in a lawsuit filed on Monday that the state authority overstepped its legal jurisdiction by demanding private data and violated First Amendment rights. Such demands could hurt future sales because customers would fear their personal data would be made available to state authorities, the company said.

The suit was filed in the U.S. District Court of the Western District of Washington in Seattle.

“Notwithstanding the information that Amazon has already provided, [the state] now threatens Amazon with an administrative summons and summary contempt proceeding if Amazon does not turn over the name and address of each customer who purchased or received any of the millions of books, movies, music CDs or other products that Amazon sold to North Carolina customers,” the company said in its complaint.

North Carolina requires residents to pay taxes on online purchases if buying the same item in a store would result in a sales tax. But out-of-state retailers can’t be forced to collect North Carolina’s tax if they have no physical presence in the state.

"We never asked for titles," Kenneth Lay, secretary for the state's Department of Revenue said in an interview. "That is a misunderstanding."

He said he will have the state's attorneys speak with Amazon's attorney to try to straighten out the confusion.

Amazon said it has sold 50 million products to North Carolina residents since 2003. The state’s request, according to the suit, could lead to the disclosure of sensitive information. So if a resident bought a book about, for example, how to get pregnant or deal with cancer, the customer’s name and address would be tied to such purchases and handed over to the tax authority.

Associated Press contribute to this post.

By Cecilia Kang  |  April 20, 2010; 2:49 PM ET
 
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Comments

Only in North Carolina... What the heck is wrong with that place any way?

It's like the U.S. annexed Somalia or some god forsaken medieval country. It's a drag on U.S. economy, culture, sensibilities, morality, and everything else civilized.

Posted by: kblgca | April 20, 2010 3:25 PM | Report abuse

Amazon has no standing to file suit against North Carolina. Amazon is an Indian company, with only a U.S. shell that does not give it standing in any U.S. court. The suit should be, and likely will be, thrown out on this basis alone.

Posted by: mibrooks27 | April 20, 2010 5:03 PM | Report abuse

If I recall correctly, I think there are other states that also require you to pay taxes for online purchases--they just don't always know who purchased what. I think South Carolina is one, if memory serves me. So if NC wins, there could be other states taking this same move in this time of budget difficulty for most states--seeking information about online purchases so they can send the taxpayer a bill for the sales tax.

Posted by: JeffreyW75 | April 20, 2010 5:13 PM | Report abuse

kblgca, have you ever been to NC? Do you actually have any first hand knowledge of this "god forsaken medieval country"? The place that voted for Obama (is that part of our god forsaken-ness?) and has two of the country's finest medical centers (Duke and UNC).
It's a shame that any state should lose tax revenue based on Internet services. Our governor, Purdue, is trying to actually run government with a balanced budget (perhaps that's medieval?), and I suppose she thinks a wise move would be to collect taxes which are due. It's nice to know that our tobacco crops are a "drag" on the US economy.
What state do you live in?

Posted by: ev3177 | April 20, 2010 5:30 PM | Report abuse

Wait till Virginia's three stooges get a hold of this. I am sure the Virginia Attorney General Ken Cuccinelli wants to know what you're reading if it isn't the Bible.

Posted by: waxtraxs | April 20, 2010 6:24 PM | Report abuse

Personal opinion, all on-line marketers should be collecting state and even local sales tax from customers and turning that money over to the state/municipality. I understand that not charging tax is a short-term money saver for individual customers, but it gives the on-line sellers an additional advantage - they don't have the cost of a physical presence for a bricks-and-morter store, in addition to not charging sales tax. I don't see why they should have that additional advantage, at the expense of the budget of every state that presently charges sales tax. And yes, I make on-line purchases, and yes, I would be willing to pay the sales tax. It would not be an onerous burden to the sellers - they just have to set up a program to compute the sales tax based on zip code, collect it, and on a regular basis pay it to the taxing body. That should not be a difficult thing to do once the program is developed.

Almost every state is having budget problems, seeking income from every possible source, and cutting programs left and right - which hurts the residents of those states. Getting sales tax from on-line purchases could off-set other taxes or fees that otherwise might be imposed in those states, or save some programs from being cut.

I also don't buy Amazon's argument that they'd have to turn over potentially harmful information about the buyer's purchases - they can just turn over the information that identifies the NC resident and the amount of purchases made each year. Why would they have to turn over information identifying each purchase?

Posted by: vklip1 | April 20, 2010 6:42 PM | Report abuse

As I recall the Constitution of the United States of America in Article I, Section 9, fifth paragraph states:
No tax or Duty shall be laid on Articles exported from any State.

It would therefore seem to me that the officious officials in North Carolina need to bone up on our Constitution and stop wasting their state's taxpayer's money.

Posted by: cqbrodie | April 20, 2010 7:39 PM | Report abuse

"As I recall the Constitution of the United States of America in Article I, Section 9, fifth paragraph states:
No tax or Duty shall be laid on Articles exported from any State."
--comment by cqbrodie

But that is in the section on Limitations on Congress. How does that limit a state vs a corporation based in another state?

More interesting is a paragraph in Art. 1, Sec. 10, which says:
"No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it's inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Controul of the Congress."

It would seem from a plain reading of that section that if N.C. collects a tax from Amazon, it must turn over the proceeds to the U.S. Treasury. I wonder if Amazon would go for that?

Posted by: jv26 | April 20, 2010 8:19 PM | Report abuse

Sucks to be someone who lives in North Carolina. Obviously, that state has no idea how to fairly tax. There is so much corruption in that state government, they make the mafia look law abiding.

Posted by: William18 | April 21, 2010 3:54 PM | Report abuse

The comments to this entry are closed.

 
 
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