Amazon Fights For Privacy of Customer Records

suraj.sun notes a CNET article on Amazon's lawsuit against North Carolina on the grounds that the state is trying to violate the privacy and First Amendment rights of Amazon's customers. "Amazon.com filed a lawsuit on Monday to fend off a sweeping demand from North Carolina's tax collectors: [for] detailed records including names and addresses of customers and information about exactly what they had purchased. ... North Carolina's Department of Revenue had ordered the online retailer to provide full details on nearly 50 million purchases made by state residents between 2003 and 2010. Because Amazon has no offices or warehouses in North Carolina, it's not required to collect the [state's] 5.75 percent sales tax on shipments, although tax collectors have reminded residents that what's known as a use tax applies on anything 'purchased or received' through the mail." Amazon is arguing that the records of what books, music, and videos its customers bought deserve enhanced protection.

Comments

All these states should be like New Hampshire

[tgd]

Sales tax!? Bah, if you give up schools and paved roads, you can do without it entirely.

We do!

Re:All these states should be like New Hampshire

[Etherized]

Sales tax!? Bah, if you give up schools and paved roads, you can do without it entirely.

We do!

NC's government is so corrupt, we're currently giving up schools and paved roads even *with* the sales tax.

Re:All these states should be like New Hampshire

[OhPlz]

Sullivan Tire. The MA SJC shot down the attempt, so I don't think it's much of a precedent. NH did pay close attention to this, various public officials said they would fight this matter to the end.

http://salestaxbuzz.org/2009/08/26/live-fee-or-die-vs-taxachusetts-how-story-ends/

There was a slight difference. Sullivan actually had some stores in MA. I think MA was trying to use that fact to exert pressure on the chain to supply info on sales that took place in other states.

Reminds me of way back when MA used to send state police to NH to stake out the parking lots of liquor stores. They'd record MA license plates and radio cops along the border to pull those vehicles over for not paying tax on the alcohol they purchased. NH didn't want to lose the sales, so they sent out our own state troopers to remove the MA police.

The fun continues. Not too long ago a MA state rep was photographed at a liquor store in NH buying alcohol. The ironic thing was that he had just voted on increasing the liquor tax in MA. No laws broken, but it seemed a bit unethical to many. "Do as I say, not as I do."

Re:All these states should be like New Hampshire

[inf4mia]

In NC we have the highest taxes in the southeast. We still don't have decent schools and we have some of the most dangerous bridges in the country (our roads are no picnic either). NC used to be called the "good roads state" but that no longer applies... This is just another money grab by Raleigh since they spent like drunken sailors during the dot com boom and are now broke (just like a drunken sailor).

Re:All these states should be like New Hampshire

[allseason radial]

[...] Residents have to voluntarily pay the use tax on "foreign" purchases. You think the state rep was going to do that?

Of course he was. That's what his little black book contained: records of out-of-state purchases, disguised as the names and phone numbers of loose women.

Re:All these states should be like New Hampshire

[QuantumRiff]

The key to stopping this kind of boarding hopping is to take a note from the west coast, and make your states bigger.. I mean sure, in vancover, WA, they hop over the river, and buy things in portland tax free, but thats just a small percentage of the population. Now, you guys just gotta have some mergers and aquisitions, and combine some states, so its more than a 20 min drive to the next state. Seriously, the western states have counties bigger than you easterners.. Of course, out west, they tried to do the opposite, and tried to form the State of Jefferson by carving out a piece of northern CA, southern OR, and a bit of Nevada.. (google it) but put it on hold when WW2 started.

ps. my old county had a land area bigger than most eastern states, and only 4 cops per shift to patrol it... No wonder they are a little more pro-gun out there..

Re:All these states should be like New Hampshire

[curunir]

The states are going after the wrong companies in trying to collect data for assessing use taxes. I get that they're going after the big fish like Amazon in an attempt to convince smaller retailers to comply of their own accord, but that still means collecting data from tens if not hundreds of thousands of sources. And given decisions like the one you referenced, they're not likely to get anywhere near 100% reporting from retailers, especially when states have a vested interest in protecting the rights of their own businesses...after all, more online vendors located in their own state means more tax revenues from those businesses.

The much simpler solution would be to deal with the credit card companies. There's relatively few of them and they've got data on nearly every out-of-state transaction. What they don't have is a breakdown of the transaction including items purchased and shipping costs, but it's enough to know whether taxes should have been collected or whether the resident should be declaring use taxes. Using data from the credit card companies, the states can come close enough to decide whether the resident has been truthful in his or her use tax reporting and whether or not the resident should be selected for audit.

And the credit card companies should be easier to deal with since they can likely be enticed or threatened by possible legislation governing how they do business in the state (i.e. personal bankruptcy laws, credit card terms disclosure, limits on excessive fees, etc.)

This is where the FTC could really step in

[BadAnalogyGuy]

Interstate trade regulation is one of the few enumerated responsibilities that the American government has. Its role is to step in to solve precisely this type of dispute. This would be a grand opportunity to decide once and for all whether internet purchases can be practically taxed, or whether the whole of interstate commerce law is a sham.

North Carolina shouldn't be demanding this type of information from Amazon, but the citizens of NC shouldn't be skirting the law and avoiding paying taxes either.

Re:This is where the FTC could really step in

[Chaos Incarnate]

Not paying an unconstitutional tax on interstate commerce—the regulation of which is expressly limited to Congress—isn't "skirting the law", it's "doing your duty as a citizen of the country".

Re:This is where the FTC could really step in

[Anonymous Coward]

What isn't touched on in the article is that the NC state government is extremely corrupt in dealings with money. We already have the highest state income tax, sales tax, gas tax, property taxes and insurance rates in the region. Honestly, about 45% of my income goes to the above mentioned things. The rest go for cell phone (taxed), car payment (taxed), dog (taxed)... you see where this is going. Our idiot governor keeps making trips to Hollywood and China, trying to bring jobs to the state (really?); all she's doing is blowing $100k everytime she takes a trip like that. Amazon was the only way I could afford my text books when I was in college, seeing as how the STATE college charged 130% of the list price in their bookstore. NC needs to learn to make do with all the money they rob from their residents without taxing us on something else.

Re:This is where the FTC could really step in

[Chaos Incarnate]

It's only "legitimate" if you accept that their tax on interstate commerce is also legitimate. Those taxes are the very kind of thing the interstate commerce clause was meant to prevent.

Re:This is where the FTC could really step in

[LaminatorX]

Not quite, though the distinction is sometimes subtle. If use tax applied only to goods purchased across state lines, then you would be correct that it would be a tariff between states and unconstitutional. However, it applies generally to any transaction where the seller is not obligated to collect sales tax on behalf of the state. This is irrespective of whether the seller is in or out-of state. If I sell my stamp collection to my neighbor for $500, I am not collecting sales tax on that transaction, and my neighbor should report that and pay use-tax on his state return. It doesn't matter if he boutght it from me, or from someone out of state. His obligation would be the same.

Re:This is where the FTC could really step in

[Late Adopter]

Not sure where you're getting unconstitutional from... The Supreme Court explicitly ruled use-taxes constitutional in Henneford v. Silas Mason Co. (300 US 577, 1937), provided the tax "is not so measured or conditioned as to hamper the transactions of interstate commerce or discriminate against them" (read as: as long as Use Tax isn't larger than the Sales Tax).

Re:This is where the FTC could really step in

[bigdavex]

Suppose two parties privately sell an item in one state and then the new owner transports the item to a second state. He uses the item in the second state. Tax is paid in the first state. The tax is paid on the transaction not on the use. So how can the state say with a straight face that this is a "use tax"? It's clearly linguistic gymnastics to circumvent the commerce clause.

Re:This is where the FTC could really step in

[rhsanborn]

Tea partiers aren't an arm of the Republican party. There are Democrats involved, and many people who generally feel disenfranchised by both Democrats and Republicans, mostly because both of them have been taking turns at tooting the same horn, which is larger government and more spending. They just tend to disagree on exactly where to spend that money. Note: I said more spending, I didn't say anything about revenues, because neither party has actually figured out how to pay for any of this stuff they spend on.

Re:This is where the FTC could really step in

[tophermeyer]

I think you'll find that many Tea Partiers are just as angry about the Bush era as the liberals are. Some certainly would like to revert back to Bush era government, but as with any political group the membership represents a spectrum of beliefs.

The real tea party movement lacks strong consolidated leadership by design, its one of the things that the movement pushes for in government. The problem is that allows many of the fringe members and rallies to be co-opted by traditional conservatives who like to think of themselves as leading a patriotic charge in the name of the people. People like Sarah Palin and other fox-news bobbleheads can easily step in because there is no single charismatic figure there to keep them out. This is unfortunate, because in the minds of outsiders it paints tea partiers as gun nut ultra conservatives that want to send another Republican to the white house. To many of us, this is the opposite of true.

Re:This is where the FTC could really step in

[bzipitidoo]

I've been thinking that the media has greatly misrepresented the Tea Party movement. The reporting makes the Tea Party look so nutty that I begin to doubt it on the grounds that no group of people sharing a common interest or three could be quite that incoherent, contradictory, and plain stupid.

There are a bunch of problems with taxation that make perfect sense to protest. Taxes are overcomplicated. An excellent example are these Taxsaver plans, in which taxpayers are asked to estimate what their medical expenses will be, and if they guess wrong, they pay more, and think it's their fault! Guess too low, and pay tax on the difference, or guess too high and simply forfeit that difference to the government! That's the sort of crap cell phone providers pull with their confusopoly. Another is the double standard in which the government pays no interest if they withheld too much money from your pay, but if it's the other way around, you pay a "penalty" calculated at a very high rate of interest. Rather like what credit card issuers do. For decades now, American politicians have been abusing the tax code to implement policy because they think that's an easier way to slip things past the public. This is why people are so angry with Congress and what I think the Tea Party is really about. They weasel extra money from the public with all this dirty pool, then they insult our intelligence by acting as if we don't see it, and then they blow most of the money on pork and unfair regulation designed to sneakily transfer wealth to their "friends" while the rest of us are left out. Taxes that are unexpected because they violate the norms and the law are unfair. I lived in NC briefly, and had no idea there was a "use tax" on items from out of state, until tax time. If someone ordered thousands of dollars worth of merchandise, it's possible a surprise tax like that could catch them without enough money on hand to pay in time, because they didn't know and had no reason to inquire about such a possibility. If this tax is legit, then Amazon should collect the tax for NC at the time of sale. Either way, NC should not be allowed to engage in a fishing expedition.

Oooohh!!!

[tgd]

I think that's my first first-post in 13 years of Slashdot!

*wipes away tear*

(And to you damn kids with mod points who want to mark this off-topic, give an old man a break... Some day you'll be old, too!)

(Oh, and get off my lawn.)

NC is desperate for money

[CodePwned]

Not that this is an excuse, but because the NC government won't play triage with projects and cut what it can tolerate so the budget is experiencing a shortfall again in the billions.

Re:NC is desperate for money

[BadAnalogyGuy]

They can't force out of state companies to collect taxes for them. That would be illegal.

However the tax must be paid (akin to a customs fee) upon entering the state. But since there is no feasible way for the state to know what is passing into its borders, citizens are able to avoid paying the state sales tax (or use tax in this case).

The answer to your question is yes. They need the personal information to pursue the purchasers individually.

Re:NC is desperate for money

[stonewallred]

As a NC native I am sad and outraged at this. Our state used to be known as the "Good Roads" state, but now the roads are falling apart, we have a ton of unsafe bridges and a state government full of thieves and morons(I apologize to any morons I offended by comparing politicians to you). The politicians spend, spend, spend, from te state level down to the cities and counties. Hell, in Winston-Salem, they just built a minor league baseball stadium, using mostly tax money, for a mere 30 million or so. Of course they claim it will pay back the money by selling 4500 tickets per home game. Lol, at the old stadium they were lucky to get 900 folks, and there you could avoid getting mugged walking to your car. At the new stadium there is only about 2000 parking spaces and 75% of them are on the street roughly 4 blocks or more away, in the middle of crack town, with syringes and crack vials littering the gutters. Not to mention our state parks being gutted by lack of funding. I hope Amazon wins and I hope the NC government DIAF.

Re:NC is desperate for money

[sglewis100]

Hell, in Winston-Salem, they just built a minor league baseball stadium, using mostly tax money, for a mere 30 million or so.

While I'm FAR from supporting tax-payer funded stadiums in most cases, there's a huge difference between a five hundred million park for a professional team threatening half-heartedly to move and an affordable stadium meant to lure or keep a low revenue minor league park.

Minor league teams are great for families (bring a family of four for the price of one ticket in a major league park), and it's very feasible that the tax collected over the life of that stadium will absolutely exceed 30 million. So it may very well fund a road or two. Beats another toll road every day...

Re:NC is desperate for money

[RogL]

In short: "I do not like the government spending money on stuff I don't like (sports stadiums). They should be spending it on things I do like (state parks)."

More like: "I do not like the state spending money on funding new private commercial enterprises that traditionally lose money. They should be spending it on maintaining existing state-owned properties, held in trust by the state for its residents."

A means to an end...

[Capt James McCarthy]

I would think that this is North Carolina's way to have amazon.com to start collecting taxes when items are shipped to their state. It's a force move.

Logically, there would be way to much spent then collected IMO. The state would have to track down each customers tax returns for (they can only go back a certain amount of time for an audit and I though it was 5 years, not 7 which NC wants), and then correlate the data to either ensure that the taxpayer claimed the items or did not claim the items. Then the state would have to calculate taxes on said items, or see if it affects the effective tax rate for said taxpayer, then tack on interest to those monies, then notify the taxpayer if the state can find the tax payer (moved since filing, died, etc...).

Another question would be how the state came up with the number of purchases from amazon.com to their state?

Re:A means to an end...

[Obyron]

There is also the nuclear option: Amazon refuses to ship to North Carolina, owing to the higher costs of compliance.

Re:A means to an end...

[Stele]

There is also the nuclear option

That's right! Take off and nuke NC from orbit. It's the only way to be sure, of, er, something.

A use tax is all fine and dandy...

[protodevilin]

...but I can't imagine why in hell the revenue department should know what particular items were purchased by each customer. If they're worried about losing revenue then their focus should be limited to the monies paid only; gathering data on which specific xbox games that Cleetus T. Carolina purchased during the tax year seems irrelevant.

Re:A use tax is all fine and dandy...

[LaminatorX]

The goods purchased may not all be taxed at the same rate, or some may be exempt. General catagories rather than specific titles may be acceptable, but a total dollar amount alone is likely insufficient for proper assessment.

Obviously, I hope Amazon wins... but

[DigitalSorceress]

I sincerely hope Amazon wins, but it seems to me that without some kind of federal-level intervention, more and more states are going to push to get online / mailorder merchants to collect their taxes.

Amazon's big enough that if push came to shove, they could probably implement a sales tax system based on delivery address that could cover all 50 states and the territories.

However, what really scares me is that this would be a death blow to a lot of smaller online and mail order retailers. I built a catalog and shopping cart system for a friend who had a business model that just didn't quite fit existing off the shelf models, and I have to say that I do not relish the idea of having to build in a system for 50+ different sets of taxes. However, that task is childs-play compared to the accounting nightmare my friend would have in having to fill out forms and remittances to all those different jurisdictions. She gets by, but doesn't exactly have a huge margin... the extra complication of collecting for all those jurisdictions and time/effort needed to deal with it could tip the scales on whether her business continues to be profitable or not.

So, this isn't really about one state being greedy - it's about the camel's nose under the tent.

Sooner or later, someone will suggest that the federal government charge some modest tax (say 5%) on all online / mailorder sales, then distribute the funds to the states based on their share of the delivered sales.

Of course, the federal government would probably not be able to resist getting THEIR hands on the money and we'd either end up with an insane rate with the federal government back-dooring a national sales tax in, or the states complaining that the rate needs to be higher since they're still "losing money" versus collecting their full state sales tax.

This is just an ugly situation all 'round.

Personally, I would think that the success of online retailers is at least partly due to the largely tax-free nature of sales transactions. I doubt we'd see sales taxes kill e-commerce, but I can see it hurting small e-tailers and having a bit of a downward pressure on sales as it'll be eating into the spending power of the buyers.

Re:Obviously, I hope Amazon wins... but

[Sesticulus]

I do not relish the idea of having to build in a system for 50+ different sets of taxes.

Like it's only 50! Sales taxes can change along county and township boundaries. What is actually taxed changes too.

Re:Obviously, I hope Amazon wins... but

[cyberworm]

Also, for some purchases, shipping is cheaper than or equal to sales tax. At the point that you add tax+shipping, then purchasing online has really lost most of it's appeal and it just makes more sense (from a budget perspective) to go to the brick and mortar store and but it.

Re:Obviously, I hope Amazon wins... but

[natehoy]

Yes, try something closer to 50,000 tax rates once you factor in county/municipal/local sales taxes, differing rates based on the item sold of which categories differ by state (a bag of potato chips sold here in Maine is considered a "snack" if it's a small bag and is therefore taxable, but "groceries" if it's a large bag and is therefore nontaxable, unless it is sold in a place that depends on prepared food sales like a restaurant for more than 50% of their income at which point it's a "snack" again).

On the other hand

[Anonymous Coward]

We're talking about the most expensive government in the entire history of centralized power. To claim that lack of revenue is a problem is utterly laughable. With the trillions of dollars spent by the US government every year, we should be living in a utopia by now. But we're not. We're far from it.

Clearly, the problem is where the money goes, not lack of it. In fact, it could be argued that too much money is the problem. We ought to support any measure which keeps money out of the hands of the power elite, because common sense tells us that at the very least, they have way, way too much of it.

Property taxes fund the majority of schools

[Shivetya]

and many have specific taxes aimed at roads.

Wait till the majority finds out how plush federal, state, local, and school, retirements are and how much of a debt bomb we have coming up funding programs that would cause so much angst if there were in the private areas, especially those bailed out.

I know you might have tried to be witty, but when push comes to shove you can guarantee that three areas will be cut to make the pain unbearable

1. Schools
2. Police
3. Fire

Politicians know what buttons to push. Look at NJ for what uncontrolled spending does to a state and the actions needed to fix it.

Re:Property taxes fund the majority of schools

[Anonymous Coward]

Posting AC. As a Federal employee, I can tell you that our retirement is not "plush" and hasn't been since CSRS went away. Now we have a small (reasonable) pension and a 401(k)-like account called a TSP that has a small match (5%).

Given that as an attorney I make far less with the government what I would in the private sector, yet I go to work every day happily, believing in what I do, and working hard, my retirement benefits are perfectly reasonable.

Re:Property taxes fund the majority of schools

[ProfBooty]

I'd say FERS is fairly generous compared to a private employer. I'm a GS-14 and if I was to retire with 40 years of service I would get 44% of my 3 year average high salary, which would be roughly 61k a year in pension on top of TSP. You can also continue FEHB as well, assuming you have at least 5 years of service, though I am unsure if you are required to pay the entire portion or not.

Political tool

[michaelmalak]

The CNet article mentions the Video Privacy Protection Act but not the events leading up to it. The Slashdot summary, of course, doesn't mention it at all except vaguely that the videos "deserve enhanced protection".

In 1987, the Washington City Paper, a paper from the left, published the video rental history of Supreme Court nominee Robert Bork, from the right. There was next to no dirt found, but it wasn't for lack of self-admitted trying. It was a politically motivated stunt, and they were desperate to find X-rated rentals or even just a penchant for a particular actress of the day.

By revealing detailed media purchases to a government, it gives the incumbents the opportunity to smear political challengers.

Re:One click taxation

[NotBornYesterday]

Heh heh. Funny, but the truth is that more money never solves the problems caused by waste. It only encourages it.

Get rid of sales tax

[frinkster]

States need to recognize that they have lost the battle with online retailers and instead do what they can to lower the cost of business for in-state retailers.

Namely, get rid of sales taxes and make it up via property tax and income tax.

As luck would have it, the Federal tax code encourages this. An individual is allowed to deduct their choice of two out of these three forms of taxation via Schedule A. Residents of the states which only have two of the three taxes get an unfair advantage as they are allowed to deduct their entire state taxes instead of a portion of them.

Any state that eliminates sales tax gets the advantage of lowering the overall tax burden of their residents AND providing an attractive location for online retailers to build warehouses and provide jobs that increase the tax base for the state.