Amazon Sends the Taxman Packing
In an interesting case concerning consumer privacy when making online purchases, Amazon.com filed a lawsuit against North Carolina tax collectors in order to bar a request for consumer information. The North Carolina Department of Revenue had demanded that Amazon provide it with the full details, including the name of the consumer and their home address, about the nearly 50 million purchases made in the state via Amazon between 2003 and 2010. This information request was accompanied by North Carolina officials traveling to Seattle and explaining to Amazon that any non-compliance of their request would result in some sort of retribution in North Carolina. In order to combat the North Carolina demand, Amazon filed its suit saying that such a demand is in violation of consumer privacy rights and the 1st Amendment. For more information click here.
The North Carolina Department of Revenue’s basic contention is that it has been grossly underpaid for the taxes that should have been collected on all of the purchases made on Amazon in the state. Because Amazon does not have any physical connection with the state while conducting business, it is not obligated to pay the requisite sales tax on each purchase made. Instead, the state must rely on consumers paying the requisite use tax on the items that they purchase. However, it is safe to assume that many consumers are not aware of their tax obligations because most purchases are subject to sales tax paid by the seller and not use tax paid by the buyer. All in all, this is a fight pitting 1st Amendment protection against a state’s rights to collect its taxes. I wonder who is going to win.