Evan Schuman's StorefrontBacktalk

In its latest move to defend itself against state taxation, Amazon.com on Monday (April 19) sued North Carolina officials for seeking customer names, declaring that “the disclosure will invade the privacy and violate the First Amendment rights of Amazon and its customers on a massive scale.” To make its case, the federal filing lists several of the North Carolina purchases Amazon considers to be most embarrassing.

North Carolina asked that Amazon turn over to the state the names, addresses and purchase history of all North Carolina residents who purchased anything from Amazon since 2003. Amazon’s federal court protest and concerns are legitimate, because such details—in the possession of a government agency—could easily morph into a public records situation. And if such disclosure is permitted, it could be mimicked by many other states, which might discourage people from purchasing products from any larger e-tailers.

That said, there’s no small amount of irony that Amazon, which has a well-earned reputation of leveraging every piece of customer information in any way possible to boost sales, is the one making this privacy argument. It’s as though Amazon is channeling a classic line from Animal House: “He can’t do that to our pledges. Only we can do that to our pledges.” Gosh darn it, if anyone’s going to invade the privacy of Amazon customers, it’s going to be Amazon.

Fortunately, the Animal House line is not quite Amazon’s argument. In court filings, it argues that the North Carolina Department of Revenue “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.”

To be fair, North Carolina is being asked to trust Amazon and, in this instance, Amazon does have a strong incentive to recall such information selectively. The act of random spot checks with those state residents might give Amazon an incentive to be more forthcoming.

North Carolina’s apparent strategy is that it wants a way to verify—or at least spot check—the information Amazon produces. That’s a fair request, but a judge needs to weigh that against the extreme privacy violations. North Carolina would presumably counter that all material received will be strictly confidential, in the same way its state tax returns gather petabytes of ultra-confidential salary and medical expense information and, presumably, it has never let any of that data leak.

The spot check rationale has a logic flaw, though. Assuming for the moment that Amazon chooses to be dishonest about its filings and underreport revenue from North Carolina, it’s logical to assume that instead of underreporting specific customers’ transactions (saying that Jane Smith purchased $20 worth of goods when she actually spent $2,000), Amazon—if it wanted to cheat—would probably simply not mention groups of customers while accurately reporting others.

How would North Carolina possibly spot check that? Start calling state residents who are not on any of Amazon’s lists, hoping to stumble on someone who shopped there?