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  1. #1
    OPM and Moderator Chuck Hamrick's Avatar
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    Amazon wins another sales tax battle
    Looks like Amazon used protection of personal information to block North Carolina in collecting sales tax.

    North Carolina backs off requiring personal e-commerce data from the online retailer.

  2. #2
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    While this is certainly a victory for privacy advocates (here, the ACLU), it is NOT a victory over any sales-tax issue. According to the article, the settlement only protects against disclosure of "the names of books or other media items they have purchased online." Amazon is apparently not a party to this specific litigation or settlement.

    NC's request to Amazon and the litigation and settlement, are not related in any way to the "advertising nexus" tax law which NC enacted last year.

    The state still seeks to compel Amazon to disclose information regarding sales to North Carolina customers, so that NC can determine if those taxpayers may have failed to report and remit sales/use/excise tax for those purchases. Although NC now says it doesn't want product names or titles, I assume that NC still wants Amazon to identify the types of products purchased by each customer (so that NC can determine which purchase transactions were exempt, and which were non-exempt and thus should have been reported by customers to the state, under its sales/use/excise tax system).

    I expect that Amazon will continue to refuse to cooperate with NC's request and similar requests from state tax agencies in states where Amazon claims to have no "nexus." State politicians and bureaucrats will keep milking this issue for publicity (it's really effective pandering), but I doubt they'll get the data they claim they want.

    It's also unclear what states would actually do with any data they might get from Amazon or other out-of-state resellers. While states would would likely pursue residents (especially businesses) who've spent huge amounts (thousands of dollars), I doubt states will incur the cost to do large-scale computer-matching and research (though they might use such data to send a bulk mailing without either matching against taxpayers OR evaluating whether the taxpayers have already reported the purchases). Without matching and research, these would be "idle threats."

    I suspect the real goal is intimidation -- to frighten state residents into self-reporting their purchases and paying the sales/use/excise taxes which they owe. It might be a reasonable strategy to increase awareness of and compliance with the state's sales/use/excise tax laws. As someone who has reported and paid California sales tax on purchases from Amazon, I want other taxpayers to pay their fair share, too.
    Last edited by markwelch; February 15th, 2011 at 10:35 PM.

  3. #3
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    Just to clarify: Amazon has actually provided NC with some data which the state could use to identify and pursue some tax evaders. From another article, regarding a U.S. District Court (in Seattle) ruling in Amazon's favor:

    > ".... Amazon provided North Carolina with data including order I.D. numbers, ship-to address, and Amazon’s own identification numbers that it ties to each purchase and which can be used to describe purchased products. But Amazon did not include the name, address, phone number, e-mail address or other personally identifiable information of any customer...." (emphasis added) <

    E-Payments & security - Amazon wins one in court - Internet Retailer
    Last edited by markwelch; February 15th, 2011 at 10:44 PM.

  4. #4
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    Quote Originally Posted by markwelch View Post
    The state still seeks to compel Amazon to disclose information regarding sales to North Carolina customers, so that NC can determine if those taxpayers may have failed to report and remit sales/use/excise tax for those purchases. Although NC now says it doesn't want product names or titles, I assume that NC still wants Amazon to identify the types of products purchased by each customer (so that NC can determine which purchase transactions were exempt, and which were non-exempt and thus should have been reported by customers to the state, under its sales/use/excise tax system).

    I expect that Amazon will continue to refuse to cooperate with NC's request and similar requests from state tax agencies in states where Amazon claims to have no "nexus." State politicians and bureaucrats will keep milking this issue for publicity (it's really effective pandering), but I doubt they'll get the data they claim they want.
    I wonder if there's any way to quantify what it's costing NC taxpayers for the state to do all this...

  5. #5
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    eloquently stated
    Mark ~ thanks for the nuanced & well-reasoned analysis. But I wonder if it's a poorly-worded IR article, because how in the world does Ship-to address NOT meet the criteria of "personal information related to consumers’ online purchases" (especially for Prime junkies)? PO Boxes & shipping to work addresses feels like a pretty flimsy firewall IMHO.

    I guess it's academic at this after 200+ One Click purchases (yikes) I doubt Gov Bev & the NC DoR would have any trouble finding me if needed...

  6. #6
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    The crux of the problem is that states are stuck in the 19th century (or whenever sales tax started). It makes sense if it is paid at the point of purchase, and the point of purchase is under their jurisdiction. Simple POS systems can add the amount and the customer pays it.

    Use taxes have been total nonsense from the beginning. I could understand a use tax if it only applied to large purchases; people only buy so many sofas, refrigerators, entertainment systems a year. I can imagine that even the average guy could manage to report and pay for his one or two purchases a year, especially if there were a few lines on the income tax form. Yes, it's a different tax, but if there were a place to list two or three significant purchases, I think most people would find the information, fill out the lines on the form, and pay.

    But when it applies to every purchase, no matter the amount, it becomes total nonsense in today's world of online purchase. I'm sure that many people - not just the "rich" - buy numerous items online; items that cost $10 or $20 or $50 dollars each. Books, CDs, toys, clothing, etc. And they buy them from more than just one merchant; maybe from 10 or 20 or 30 different merchants, of which some (but few) have a nexus and collect the sales tax and the rest don't. I can imagine it taking days for the average person to collect this information, sort through it, and report it. And, they would need to know the tax rate (which often varies by their location, and even by item). It's nice to have a use tax law, but when it is impossible to comply with, people won't.

    I'd even support an alternative which says that the average person with net income of $x buys $y of sales taxable items, so - drum roll - you owe $z for the "sales tax" fund. And put that on the income tax form. (For most states, with both, this will work nicely). Perhaps require that they list any item that cost more than $1000. But, bottom line, they need a collection method that will work and that will not create millions of man hours of work.

    For the record, the attempt to force out of state merchants to report purchases has failed at the first legal challenge in both Colorado and North Carolina. Hopefully, all the states will see the handwriting on the wall, and turn their efforts to another approach. Something like mine, perhaps ...
    Last edited by shuvee; March 25th, 2011 at 03:02 PM. Reason: spelling error
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