Raleigh, N.C. — The North Carolina Department of Revenue has settled a privacy lawsuit with the American Civil Liberties Union and has agreed to stop asking for the personal information of Amazon.com customers, officials said Wednesday.
Amazon has been fighting for months with the state, which wanted detailed records of what customers in North Carolina have purchased since 2003 so that it could collect an estimated $50 million in sales and use taxes.
The online retail giant provided the state with details about purchases without identifying which customer bought what, but the state wanted names and addresses linked to the purchases.
In a lawsuit, Amazon argued the request violated customers’ privacy because the state would be able to determine their buying patterns. The ACLU later joined Amazon in the fight.
"The N.C. Department of Revenue does not need access to private customer records that reveal which specific customers in North Carolina have ordered which specific books, music, or movies in order to complete its audit of Amazon and collect any taxes owed,” Jennifer Rudinger, executive director of the ACLU of North Carolina, said in a statement Wednesday.
“We are pleased that the public’s First Amendment rights have been upheld by this settlement, which prohibits the department from seeking this kind of information from Amazon or other Internet retailers in the future," Rudinger said.
Amazon wasn't part of the settlement, Rudinger said, and it was unclear Wednesday whether the company's lawsuit over the Revenue Department's audit of its sales in North Carolina was pending on appeal.
In October, U.S. District Judge Marsha Pechman ruled that the state’s request for customer data went too far and "runs afoul of the First Amendment” and that there was “no legitimate need” for the state to know what customers purchased.
"The fear of government tracking and censoring one’s reading, listening and viewing choices chills the exercise of First Amendment rights,” Pechman wrote in her ruling.
Beth Stevenson, spokeswoman for the Revenue Department, said Wednesday that the settlement with the ACLU reinforces the argument that the state was never interested in people's buying patterns.
"The case between the North Carolina Department of Revenue and Amazon has long been twisted into something it is not. Bottom line, this is about fairly collecting the tax that is due to the state of North Carolina and nothing more," Stevenson said in a statement.
Pechman's ruling upheld the state's right to collect sales tax and the necessary information to do so, Stevenson said.
"The department has always maintained that we do not need – or want – titles or similar details about products purchased by Amazon customers. The department voluntarily destroyed the detailed information that Amazon unnecessarily provided and offered them the opportunity to comply with the state tax laws moving forward," she said.
"The lawsuit on this particular issue could have been avoided altogether if not for the aggressive stance Amazon took to avoid compliance with North Carolina’s tax laws," she said. "There would have never been an issue of customer privacy if Amazon would simply collect the North Carolina sales tax that others already do."
The Revenue Department also faces a lawsuit from several online travel companies over a recent change to the state tax code.
Orbitz, Travelocity.com, Hotels.com, Hotwire Inc., Travelscape and Trip Network Inc. allege in their lawsuit that the state and counties want to collect sales and occupancy taxes on the fees the firms charge customers to book cheap hotel rooms. They maintain that the state law violates federal law governing online commerce and arbitrarily changes the contracts they have with hotels in North Carolina, and they want a judge to void the law.