Via the Volokh Conspiracy comes the news that North Carolina is seeking the names of everyone who has bought anything from Amazon.com since 2003. Now, why in the world would the North Carolina Department of Revenue want to know what everyone in North Carolina has purchased from Amazon?
Use Tax.
When you buy something from an out-of-state merchant that has no physical presence in the state, you are supposed to pay Use Tax. Use Tax laws have, for the most part, been on the books for years (California’s law dates back to the 1930s). North Carolina tax authorities figure that if they sent an administrative summons to Amazon maybe they could find $16 million or so of easy money.
In December, North Carolina sent the first request to Amazon. Amazon sent a list of what North Carolinians purchased from Amazon by product, city, and ZIP Code, but left off the customer names and addresses. There’s no question that Amazon isn’t subject to collecting sales tax in North Carolina–they have no offices, employees, or any physical ties to the state. So the “audit” of Amazon’s sales tax collections in North Carolina would seem to be just a grab for the names of state residents who hadn’t paid Use Tax.
And that was basically confirmed. North Carolina wasn’t satisfied with the initial data that Amazon sent:
By letter hand delivered on March 19, 2010, to Amazon in Seattle, Washington (the “March Information Request”), the DOR stated that Amazon’s initial response to Question 16 of the December Information Request omitted the “Bill to Name; Bill to Address (Street, City, State, and Zip); Ship to Name; Ship to Address (Street); Product/item code or description” (the “Customer Data”). The DOR demanded that Amazon provide this information “for examination” on or before April 19, 2010.
That comes from the request for Declaratory Relief filed by Amazon in federal court in Seattle. “Amazon respectfully asks this Court for … [a] declaration that, to the extent the March Information Request demands that Amazon disclose its customers’ names, addresses or any other personal information, it violates the First Amendment and 18 U.S.C. § 2710 .”
If North Carolina is successful, expect every state to come calling on every online merchant demanding sales information. I might even get summonsed by Florida, a state where there’s sales tax on services (I do have clients in Florida). This will be a very important battle that will likely shape sales and use tax law for some time.
