North Carolina To E-Tailers: We’re Still Coming For You

Written by Frank Hayes
February 7th, 2011

If you heard that the fight between Amazon and North Carolina’s Department of Revenue is over, listen up. On Wednesday (Feb. 9), North Carolina and the ACLU officially announced a $99,000 settlement of a federal lawsuit over what North Carolina can ask E-tailers when the state tries to collect sales taxes from E-Commerce customers. (The court case actually wrapped up late last month.) What was widely reported was that, in the settlement, North Carolina agreed to stop asking for customer names and information about purchases from Amazon. Well, no—that’s almost completely wrong.

What North Carolina agreed was to not request book or DVD titles from Amazon; only prices and general information. But in the settlement, the state’s Department of Revenue specifically reserved the right to go after Amazon or its North Carolina customers to collect sales taxes. How likely is that? The official statement from North Carolina begins with these words: 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.

Actually, that’s pretty close to true. It was Amazon that decided the only way it could respond to North Carolina’s request for information on sales in the state was to send all the titles of the specific books, CDs and DVDs that North Carolina residents had bought—and then to go public with a list highlighting some of the most potentially embarrassing titles, including Bipolar Disorder: A Guide for Patients and Families, What to Do When You Can’t Get Pregnant, Living With Alcoholism and He Had It Coming: How to Outsmart Your Husband and Win Your Divorce.

That was a brilliant PR coup, changing the public discussion to one of privacy instead of Internet taxes and throwing the whole mess into federal court over a First Amendment issue. (If there’s one thing Amazon knows as well as selling books, it’s selling reporters a story, no matter how irrelevant.)

A year later, the smoke has finally cleared on the First Amendment issue. The ACLU has collected $99,000 in legal fees for fighting for the privacy of North Carolina residents. More federal judges have weighed in on the Internet tax questions, guaranteeing that those issues will eventually end up before the U.S. Supreme Court.

And the North Carolina Department of Revenue? The best reminder of how the tax agency feels about Amazon—and by extension all E-tailers, including the 94 percent who rejected the state’s E-tail tax amnesty program last year—is the rest of its official statement about the settlement:

In October, the federal judge acknowledged our need to collect those taxes and to gather the basic information necessary to do so—stating that the ruling “cannot be interpreted to grant Amazon a free pass from complying with any valid tax law of North Carolina.”

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.

This settlement only makes our position more clear to Amazon and other retailers that the Department has no interest in the titles of books, movies, music or other expressive items.

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. There would have never been an issue of customer privacy if Amazon would simply collect the North Carolina sales tax that others already do.

So there.


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