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Local Politics

Amazon sues N.C. over customer data

Posted April 20, 2010

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— Internet retail giant Amazon.com has filed suit to block the North Carolina Department of Revenue's attempts to find out who in the state is buying what online.

The suit, filed Monday in federal court in Seattle, names Revenue Secretary Ken Lay as the defendant. Amazon is seeking a court order that would halt the Revenue Department's efforts as a violation of the First Amendment.

Amazon.com Consumers say N.C. should mind its own business

Lay couldn't be reached for comment Tuesday, but spokeswoman Beth Stevenson said the Revenue Department isn't trying to collect back taxes from people.

Because Amazon has no offices or warehouses in North Carolina, the company isn't required to collect the customary sales tax on shipments. North Carolina requests voluntary compliance from taxpayers, asking them to include a "consumer use tax" on their individual income tax returns for anything purchased or received through the mail.

Last year, North Carolina passed a law that required out-of-sate retailers to collect sales tax in the state if they have marketing affiliates within the state. Amazon responded by ending its affiliate program in North Carolina and currently doesn't collect sales tax in the state.

Amazon contends in the suit that it routinely provides the Revenue Department with "voluminous information" about its sales to North Carolina addresses as part of routine audits of the company's compliance with sales and use tax laws. The information includes the date and total price of each transaction, the city, county and ZIP code to which each item was shipped and Amazon’s standard product code for each item, which allows officials to see the description of every product purchased.

In March, however, the Revenue Department threatened to hold a civil contempt hearing for Amazon if the company doesn't also turn over the names and addresses of anybody in North Carolina who has purchased goods off its website since August 2003, according to the suit. The company said that amounts to nearly 50 million purchases.

"If Amazon is forced to comply with this demand, the disclosure will invade the privacy and violate the First Amendment rights of Amazon and its customers on a massive scale," the suit states. "The (Revenue Department) does not need personally identifiable information about Amazon’s customers in order to audit Amazon’s compliance with state tax laws. All it needs to know is what items Amazon sold to North Carolina customers and what they paid, and Amazon has already provided that information."

Stevenson couldn't say why state officials need customer names and addresses for an audit of Amazon's compliance with tax laws.

"The best-case scenario for customers would be where the North Carolina Department of Revenue withdraws their demand because they recognize that it violates the privacy rights of North Carolina residents," Amazon spokeswoman Mary Osako said.

Amazon argues that most of its sales are in "expressive materials," such as movies, music and books. Turning over details of such purchases to the government could affect people's buying habits, making them less likely to buy "items that might be personal, sensitive or controversial," according to the suit.

The company has a firm policy of not sharing customer data with outsiders, giving people who use the website an expectation of privacy, according to the suit.

"Amazon asserts the privacy and First Amendment rights of itself and of its customers so that Amazon may sell – and customers may read, hear or view – a broad range of popular and unpopular expressive materials with the customers’ private content choices protected from unnecessary government scrutiny," the suit states.

Some area residents who have purchased items through Amazon said they don't think the state should be prying into their buying habits.

"It's really none of their business what I ordered," Saleemah Abdullah said.

"My books and what I read is pretty much my business," Barry Edwards said.

"I think it gets sticky when the state is asking a company for people's private information," Katrina Henderson said. "I could understand the state's side of it where they want people to pay the amount of taxes that they owe."

265 Comments

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  • artist Apr 21, 1:35 p.m.

    There is a reason people buy on he internet... mainly because you cannot get it locally... and if you could... it usually costs more.

    So... stating that online retailers are taking away local business is BS. If locals had the items we want... and had them at a fair price... we would gladly buy. Most of us rarely refuse to purchase an item because of taxes.

    And if NC was not charging a gazillion dollars in gas taxes.. I might just drive around locally looking for the items I want.

    Hey local bizzes..... you guys turn over customer purchase information to the state?

    Who the hell listens to Ken Lay anyway?

  • DowntownGirl Apr 21, 12:55 p.m.

    You know, I don't think anyone would be as upset about paying taxes if there wasn't so much waste of tax dollars all around us.

  • yabo2k3 Apr 21, 12:40 p.m.

    My parents moved to NC in 2007. Does this mean that they owe use tax on the retirement accounts they have, the 2 cars they own, the estimated $50k in stuff they moved here with?

    This is absolutely stupid. The state of NC is going to have to prove in courts any charges they wish to levy. First, they have to prove I used the item in NC. Second, they are going to have to prove the serial numbers match the product I received. I can file away serial numbers.

    The State cannot afford this fight with Amazon and then each individual.

  • Voice of Reason 23 Apr 21, 11:58 a.m.

    Hmmm, I wonder how many people complaining on here paid the tax they are supposed to pay on their internet purchases? I doubt that more than 1% of them.

    NC doesn't need to know what we purchased, but they are well within their right to know how much we spent that we owe taxes on. Everyone should receive a bill for the taxes they owe.

    If you don't like the taxes, then work to have them repealed, but at this point and time, it's a law, and should be followed until it is repealed.

  • jds1vette Apr 21, 11:55 a.m.

    I have been looking at a 55" LCD at the local Sam's. I think I will drive to VA or SC and buy it. Probably SC, they need the money. I feel no loyalty to North Carolina. It's fun to play dodge the taxman.

  • KCfromNC Apr 21, 11:37 a.m.

    "If the average purchase were 15.00 on those 50 million purchases, the state would be out 6 million in use tax just from amazon purchases."

    Is that estimate gross or net of the legal costs to fight a company on the other side of the country for several years to get the information?

  • KCfromNC Apr 21, 11:33 a.m.

    "It does have a right to know name address, dates, and amounts of purchases in order to effect compliance of a law that has been on the books since Day 1 of the sales tax in this state. "

    Since when could states enact laws that are valid in other states? Regulating interstate commerce isn't a right given to individual states.

    Maybe if Washington state just enacted a law saying that NC's use tax were repealed this whole problem would go away? Makes as much sense as NC pretending it has any jurisdiction over a WA company.

  • swordmistress Apr 21, 11:19 a.m.

    Okay, answer me this one. I have a wishlist on amazon. My father, in Alabama, buys me something off my amazon wishlist and has it shipped to me. Will they be going after all out-of-state purchases shipped into state as well?

  • NC Reader Apr 21, 10:58 a.m.

    I love it when people who normally wouldn't work together find themselves on the same sides of issues. There are the pro-Revenue Dept. people, who are the pro-more taxes people AND the N.C. business owners. Then there are the anti-Revenue Dept. people -- the anti-taxers and the pro-privacy advocates. I like to sit back and watch the melee.

    I've been reporting the amounts of my online, non-taxed by the company, purchases for years. It's the law, and I'm a law-abiding citizen. I would, however, not be happy to know that the actual identity of the items I purchased would be reported to the government. Although I have nothing to be embarrassed about, that would be way too intrusive.

  • NeverSurrender Apr 21, 10:48 a.m.

    "Will the great state of NC go after ALL internet companies? Why single out Amazon?"

    ---

    Amazon is merely the latest to be targeted by DOR.

    The out-of-state computer manufacturers got bullied into collecting sales tax for North Carolina years ago...even the ones that truly had no nexus in the state. (Dell and Gateway had actual retail stores/kiosks which is what screwed them but other manufacturers like Acer had no point-of-presence at all save what Best Buy put on their shelves which is typically not enough to establish nexus).

    North Carolina's take was that computers sold over the internet were the single-most lucrative flouting of the 1939 use tax law and summarily demanded jurisdiction.

    The computer manufacturers figured it was more cost-efficient to just give in to the state's demands than to fight them on it.

    This time, it looks like DOR is fishing for far more than when they took on Dell...the personally-identifiable information is the scary part. I hope they lose badly.

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