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Amazon Bad News Behind Mask Of State Tax Win
When the state demanded that information (so it could bill its residents for the tax), Amazon went to court on privacy grounds and this week won—sort of.
But it’s a Pyrrhic victory. E-tailers really don’t want to be involved in collecting sales taxes at all. (When North Carolina launched a sales-tax amnesty program for out-of-state E-tailers, only 6 percent of E-tailers signed up, according to the state.)
But now all North Carolina has to do is send a few CDs full of transaction data back to Amazon to satisfy the judge’s ruling. (The state says it has already deleted the data from its computers.) Then Amazon will have to fork over reams of customer names. And next spring, North Carolina can send letters to residents saying, “You bought $117 of books, music and DVDs from Amazon.com, and now you owe sales tax on it.” That isn’t going to make customers feel happy about Amazon—especially when all that sales tax will be due at once.
What’s worse, even though Amazon fought and won its great battle to protect customers’ privacy, most of them won’t get that message. They’ll just hear that Amazon told the state about the books, music and DVDs they bought. Those customers won’t know what Amazon didn’t tell the state—just that the privacy of their online transactions was breached and Amazon must have been the one that did it.
There is a silver lining for Amazon, though. Now that Amazon has “won” its case, the door is open for North Carolina and other states with “Amazon tax” laws to go after other out-of-state E-tailers, too. That means Amazon will be turning over customer information, but so will all its E-Commerce rivals. With all E-tailers doing it, it won’t really represent a competitive disadvantage.
Well, at least not a competitive disadvantage against other E-tailers. But will this be a powerful competitive weapon in the hands of brick-and-mortar rivals? Will those physical chains—think of Sears, which has already laid the groundwork for an anti-E-Commerce tax argument—tell consumers, “When you price compare with Amazon, don’t forget to add in that wonderful bill you’ll get from the state, when it asks for all your E-Commerce taxes at once. Buy from us today, you get your item—and no mailbox mayhem.”
-Marc
October 28th, 2010 at 9:48 am
Wasn’t the ruling that NC cannot own both the items bought and customer information at the same time? How would they be able to match the two? The only thing NC would know is $X billion in tax is owed and these are the people who should pay it. A customer could claim they purchased $1 worth of items and NC would never know.
October 28th, 2010 at 4:36 pm
The Quill decision in ’92 upheld an earlier decision (Bellas Hess ’67) that said it would be too burdensome for out-of-state retailers to collect state sales tax. Today, technology makes is easy for anyone to open a Web business, manage inventories, use targeted marketing, calculate shipping etc.
The Main Street Fairness Act, now pending before Congress, would modernize the law to catch up with the reality that so much shopping is now done online. It is better that Congress address this issue so that all businesses collect the correct tax. Until then, more and more states are going to be attempting on their own to collect these taxes, which will 1) raise privacy concerns as in the NC ruling, and 2) raise fairness issues since not all consumers will be contacted to pay up.
October 28th, 2010 at 7:17 pm
Okay … there’s a reference in this article to a NC Dept of Revenue person saying they want the information to collect outstanding use taxes from the consumer.
However, throughout the judgment both the court and DOR stress that the information is required with respect to the audit against Amazon, not its customers.
Unless the state is able to establish Amazon has a tax nexus in the state, then it’s unlikely they will make a tax nexus claim stick. To me, it seems obvious that the DOR has another agenda entirely. Sorry, NC customers.
I hope Amazon appeals this decision.
October 28th, 2010 at 8:34 pm
I have said many times that the Sales & Use tax is the most insidious tax ever devised in the US. There is no end to it. Yes, everyone owes tax even if purchased without it according to the laws. Like going to a sales tax free state in the next state and bringing it home, you still owe Your state the tax, or the difference.
This is the one tax that puts the burden on the low end of the income spectrum, too, – sure everyone pays the same rate – But taxing me on what I earn and then, when I spend it, taxing it again?
Unless they is a serious push to make these taxes uniform, it is also a major PITA to keep up with all State/City/Local tax rules and rates – I know, I did it for 25 states for many years. Some states have over 4 jurisdictions, too! Solid Waste Commission tax – really?
The Sales & Use tax is the politician’s easy way out.
Solid