Local Politics

State: Amazon customer data 'issue of fairness'

Posted April 21, 2010 12:20 p.m. EDT
Updated April 21, 2010 6:40 p.m. EDT

— North Carolina Revenue Secretary Ken Lay said Wednesday that the state isn't interested in people's reading, listening or viewing preferences. Officials just want customer information from Amazon.com so they can collect sales taxes.

The online retail giant filed suit Monday in federal court in Seattle to block the North Carolina Department of Revenue's attempts to get the names and addresses of North Carolina residents who bought or received items from Amazon since August 2003. The information would cover about 50 million purchases, the company said.

Amazon alleged in the suit that the Revenue Department's efforts violate the First Amendment rights of customers "on a massive scale," noting people's buying habits might change if the government had access to the details of the books, movies and music they were buying.

Lay said in a statement Wednesday that state officials just want the detailed information of Amazon's sales to North Carolina addresses so they can accurately collect sales tax on the transactions.

The stance contradicts a statement made Tuesday by a Revenue Department spokeswoman, who said the customer data wasn't an effort to collect back taxes and was solely part of the department's audit of Amazon's compliance with state tax laws.

"This is really an issue of fairness and equity for small businesses – the brick-and-mortar, corner-store operations," Lay said. "These businesses are at a competitive disadvantage when they have to collect sales taxes that other businesses do not."

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-state 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 from North Carolina customers.

By some estimates, North Carolina loses $140 million a year in unpaid taxes from online sales.

Lay told WRAL News that other online retailers already provide the Revenue Department with customer data. He added that the state doesn't plan to pursue tax cases against every Amazon customer in North Carolina who owes back taxes, but he didn't specify a threshold that might pique the state's interest.

"For incidental things, I'm sure there won't be an issue, but for someone who is quite a large user of online services and there's a significant tax liability, then we would (go after them)," he said.

Revenue Department officials called Amazon’s suit "misleading," saying that they never asked the retailer to turn over detailed information that would reveal personal consumer preferences.

Amazon spokeswoman Mary Osako said the Revenue Department specifically asked for "all information for sales to customers with a North Carolina shipping address," including product codes or descriptions of each item.

"It’s encouraging that the North Carolina Department of Revenue now agrees that it doesn’t need the customer information it has demanded in order to complete its audit of Amazon," Osako said. "We are hopeful that the Department of Revenue’s statement will enable us to continue cooperating with the department’s audit in a way that does not compromise the privacy and First Amendment rights of our customers."

The American Civil Liberties Union of North Carolina sent a statement to Lay Wednesday asking that he "respect the privacy and First Amendment rights of North Carolina consumers" and not seek personal information from Amazon.

"It is unconstitutional and wholly unnecessary for the (Revenue Department) to gain access to private customer records that reveal which specific customers in North Carolina have ordered which specific books, music, or movies in order for the (department) to complete its audit," ACLU Executive Director Jennifer Rudinger said in the statement.