Amazon sues N.C. over customer data
Posted April 20, 2010
Raleigh, N.C. — 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.
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."