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Amazon Prevails In State Sales Tax Dispute, Thus Far 171

snsh writes "A US judge has ruled for Amazon.com (PDF) against North Carolina's request to turn over the names of its customers to state tax officials. The ruling was focused on privacy grounds, so the state can still re-request less detailed sales data which does not identify items purchased." Reader arbitraryaardvark adds a link to The Volokh Conspiracy's take on the decision.
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Amazon Prevails In State Sales Tax Dispute, Thus Far

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  • by commodore64_love ( 1445365 ) on Wednesday October 27, 2010 @08:28AM (#34036060) Journal

    The outcome of this case affects not just Amazon, but also its sellers.

    "No taxation without representation" is the principle. Why should I be subject to taxation by a foreign government (Carolina) when I have no voice in their legislature? It makes as little sense as saying a Frenchman should have to pay income tax to the Polish government. My allegiance is to MD and US..... any other governments have zero authority over me.

    • by Zironic ( 1112127 ) on Wednesday October 27, 2010 @08:31AM (#34036082)

      Sure they don't have any authority over you (unless your government says they do and extradites your ass) but they do have authority over anything you do in their territory, like transferring goods.

      • And then there are us louts who actually live in North Carolina, and who did not go through the hassle of anonymous purchases, and will have to deal with the Tax fallout from this bickering. We're the ones who will have to pay the cost for the taxing "at the highest possible rate." Im not trying to hide bdsm book purchase here, I just want to get my copy of the Dresden Files without too much hassle. Is that so wrong?
        • by nedlohs ( 1335013 ) on Wednesday October 27, 2010 @09:36AM (#34036594)

          No, since you put all those purchases on your state income tax return and paid use tax on them at the appropriate rate it won't affect you at all.

          • So states should be allowed to tax interstate commerce as long as they change the name?

            • by mea37 ( 1201159 )

              Perhaps you haven't been paying attention, but the Court already took up that issue.

              Yes, a state may tax an interstate sale of goods received in its territory so long as the tax is no greater than the sales tax that would apply if the sale took place entirely within the state. If the use tax were higher, it would be an illegal restraint on interstate commerce, but up to that point it is not.

            • That's irrelevant to the situation, since they do and challenges to them doing so have been rejected.

              But, yes I do think they should be allowed to do that. Taxing interstate commerce at a higher rate than local commerce would be a problem. Taxing interstate commerce that doesn't involve their state would be a problem.

      • >>>they do have authority over anything you do in their territory, like transferring goods.

        Hence the "use tax". The customers I sell to in North Carolina are subject to NC laws, and are required to pay a use tax (6%) on their purchased items.

        I on the other hand, having never set foot in NC and having no representative in their legislature, am NOT subject to their laws. Again: No taxation w/o representation.

        • Sadly, you're 100% correct.

          I say "sadly" because the vast majority of the public who shop online and aren't charged sales tax by the vendor will never give a second's thought to this. If/when local states can force the vendors to provide this information, the states will see it as a windfall of much needed funds.

          If they're going to start getting such info, I hope the court does something like say that FROM THIS POINT FORWARD, any purchase (tax) information will be made available to the destination state, an

          • Re: (Score:3, Insightful)

            by gtall ( 79522 )

            Just to be a prick, if you are a firm retail stores in 50 states, you must keep up with 50 state laws. Internet retailers are no different. We have computers to figure out the tax, take the money from the credit card companies, and pay the internet retailers' current tax bill. I admit it will cost them some money to get the changes in their systems which will handle the state taxes. The real problem is not going to be places like Amazon which can afford the expense. The real problem will be Ma and Pop inter

            • Re: (Score:3, Insightful)

              by tompaulco ( 629533 )
              ...I don't think it is an answer to say that no internet sales tax should be charged because it puts brick and mortar stores at a disadvantage. Also, many states have their finances built in part around sales taxes.
              Brick and mortars already have a disadvantage of having to maintain inventory and an expensive storefront. Lack of Internet sales tax would not be an issue to them if people would pay their use tax.It's not the internet creating the problem, it is the citizens.
              It is not some company in Iowa's
            • The thing that you are overlooking is that in several states, sales tax rate varies from location to location. In NY each county and municipality may charge a different rate (within a particular range). This is not something that can be determined by zip code. You have to know which municipality a specific address is in.
            • by jbengt ( 874751 )

              Just to be a prick, if you are a firm retail stores in 50 states, you must keep up with 50 state laws. Internet retailers are no different.

              If you are a company with physical retail stores in 50 states, you are a big company with big resources and at least 50 store managers that can keep track of their own local sales tax requirements.
              If you are in internet retailer, you may be completely different, like a single entrepeneur selling a few hundred dollars worth of items per week. It may not be worth it to you to do that if you have to keep track of the hundreds of different sales tax rates and regulations across 50 states and hundreds of count

            • by curunir ( 98273 ) *

              Just to be a prick, if you are a firm retail stores in 50 states, you must keep up with 50 state laws.

              It's actually much more complicated than that...sales taxes are assessed at the county and city level as well as the state level. And what is and isn't taxable can vary depending on location as well.

              Brick-and-mortar companies have the advantage of only needing to consider the tax codes in their own locations, not every possible location their customers may live. Customers can travel from other cities, counties and even states to make purchases without those businesses having to consider any other tax codes.

          • I think it's fundamentally wrong for an online vendor to be forced to keep track of 50 states' tax laws.
            As do I. I don't think people understand that it is not just 50 things to keep track of. There are state, county, and in some cases even city taxes. My state has a downloadable format for vendors to update their records. It contains over 100,000 taxing districts. Keeping track of 50 state's worth of taxing districts would cripple anybody except the really huge sites. If interstate internet traffic were
            • by DigitalSorceress ( 156609 ) on Wednesday October 27, 2010 @11:21AM (#34037852)

              Absolutely.

              I host an online store for a friend - she used to set up booths at conventions and such but due to health reasons, she is now completely online. (used to do mail order too as it was a niche product, but nobody does mail order anymore). She's having enough trouble just complying with PCI standards. She freaked out when she first saw the questionnaires and I had to spend quite a bit of time going through it and explaining what was meant and spent a lot of time tweaking server and application to meet the PCI standard (it asks for mostly common sense stuff, but is worded with some absolutes that mean that a technically secure compensating measure doesn't qualify you to answer YES/NO to a given question, but I digress)

              The point is that she's a friend and I essentially put in quite a few billable hours pro-bono. However, PCI compliance was a walk in the park compared to what we'd have to do should she be required to deal with all those tax jurisdictions you mentioned. She would not be able to afford it with her sales and I'm at my limit (even with a friend) for how much time I'm willing/able to give away.

              I custom wrote her shopping cart and checkout system, and before anyone says it, at the time I wrote it, there was NOTHING available on the market that met her needs and she could afford.
                YES we could probably rebuild her site using something commercial or FOSS today, but she still can't afford what it would cost to do the conversion. In my opinion, such a complex mess of tax jurisdictions would force mom and pop type places offline or force them to pay big vendors for their carts/checkouts.

              That might not seem like the end of the world, but it feels like yet another barrier to entry... over time, the more regulatory and statutory hurdles businesses and individuals have to negotiate in order to go online will destroy a lot of the freedom and openness that made the Internet so fertile a place for speech and innovation in the first place.

              • Re: (Score:3, Insightful)

                by BlueStrat ( 756137 )

                ...over time, the more regulatory and statutory hurdles businesses and individuals have to negotiate in order to go online will destroy a lot of the freedom and openness that made the Internet so fertile a place for speech and innovation in the first place.

                If you happen to be a Progressive/Fabian Socialist as many on the Left in US politics and the current administration are, this is a desired design-target result/feature.

                Strat

            • Back in the 1980s, my wife was doing programming for a mail-order book store (which was like Internet commerce, only on paper :-) New York State wanted them to collect sales tax, and as you say, the taxes vary by county, town, township, etc., while the book store only knew customers' addresses and zip codes, and the tax rates weren't aligned by zip code. And different jurisdictions have different rules about what's taxable - for instance, in New Jersey, clothes aren't taxable, but in New York they are (s

      • by mysidia ( 191772 ) on Wednesday October 27, 2010 @09:33AM (#34036562)

        like transferring goods.

        Conducting business transactions and transferring goods to someone out of state is called interstate commerce. And the supreme law of the land says that the power to regulate interstate commerce belongs exclusively to the US congress, and specifically indicates that states do not have the power to lay tarrifs, duties, imposts, or otherwise tax imports.

        In other words.. no... the foreign state doesn't have authority or power to regulate you transferring goods into their state; that authority has been explicitly reserved for the feds.

        • by Panaflex ( 13191 )

          True indeed... in fact if you remember your history lessons, this is one of the big reasons the Articles of Confederation failed...

        • by mea37 ( 1201159 )

          ...except the Supreme Court, whose job it is to interpret the supreme law of the land and who serves as the higest authority on the matter, says you're wrong.

          As long as the use tax on an interstate sale to someone in the state is no higher than the sales tax that would be charged for an in-state purchase, the Court does not regard it as a tarrif.

          • >>>Supreme Court, whose job it is to interpret the supreme law of the land

            Not correct. "The question whether the judges are invested with exclusive authority to decide on the constitutionality of a law has been heretofore a subject of consideration with me in the exercise of official duties. Certainly there is not a word in the Constitution which has given that power to them more than to the Executive or Legislative branches." --Thomas Jefferson to W. H. Torrance, 1815. ME 14:303
            .

            >>

            • by mea37 ( 1201159 )

              Pretend all you want that anyone gets to overrule the Court on what is constitutional.

              Then try to make it happen.

              Good luck.

        • The problem isn't new - snail mail interstate commerce has been around about as long as the Post Office, and companies like Sears, Montgomery Ward, and Wells Fargo's shipping service became major players in catalog-based interstate commerce. And Television let you buy Ginsu Knives and Chia Pets by mail without even needing a paper catalog.

          States keep pretending it's a new threat to their revenue, but the main differences are that the web makes a much better catalog than paper, computer automation cuts the

    • Re: (Score:3, Funny)

      by JustOK ( 667959 )

      I think we should tax all foreigners not living in this country.

    • Re: (Score:3, Informative)

      by cheesybagel ( 670288 )
      In the EU they charge VAT according to the rate of the country where the destiny of the goods is.
      • by Amouth ( 879122 )
        as bas as it sounds your tax code is far simpler than ours for sales.

        depending on the good and your EXACT address you can have

        Federal
        State
        County
        City/Town
        Fellowship

        All cumulative - and they can very a lot.. where i live it comes out to be ~7.5% on normal goods 2.5% on foods like fresh veggies and 8% on sodas.

        Making Amazon a company not from this area have to keep track of that is stupid - instead it is my responsibly as a citizen to buggy up and pay the tax at the end of the year.

        What NC is trying to do is g
        • by Rich0 ( 548339 )

          Yup, where I am at soda in a bottle is tax-free, and soda in a cup is 6%, but a few miles down the road that soda in a cup is 7%.

          Everybody and their uncle in the US has the right to levy taxes. I'm surprised homeowner associations aren't doing it. :)

          • by David_W ( 35680 )

            I'm surprised homeowner associations aren't doing it. :)

            Shush. We do not want to give them ideas like that.

            • by Amouth ( 879122 )
              <quote>

              <quote><p>I'm surprised homeowner associations aren't doing it. :)</p></quote>

              <p>Shush. We do <b>not</b> want to give them ideas like that.</p></quote>

              what do you think your homeowners dues are??
              • by Rich0 ( 548339 )

                They are what they make do with while they work out how to charge tolls for road use, a utility surcharge, and a tax on all deliveries into the development.

    • by cowboy76Spain ( 815442 ) on Wednesday October 27, 2010 @08:47AM (#34036206)

      The outcome of this case affects not just Amazon, but also its sellers.

      "No taxation without representation" is the principle. Why should I be subject to taxation by a foreign government (Carolina) when I have no voice in their legislature? It makes as little sense as saying a Frenchman should have to pay income tax to the Polish government. My allegiance is to MD and US..... any other governments have zero authority over me.

      Nonsense.

      The taxes are paid by the customers, not by the sellers. As the customers reside (and purchase) in the state, they must pay.

      Notice also that TFS does not say anything like that... it just says that the state has no right to know if someone bought "Alice in Wonderland" or "How to make home bombs" or "Meth cooking for dummies". I think it is a good point to defend, but the issue of taxation itself has not been reviewed, as it is emphasized in the summary.

      Also, I'd like to play a little with your "No taxation without representation". Are you suggesting that when a convinted felon loses his/her right to vote, s/he also loses his/her duty to pay taxes? Maybe crime pays, after all.

      So... any comments other than "I do not like to pay taxes"?

      • by redhog ( 15207 ) on Wednesday October 27, 2010 @09:10AM (#34036366) Homepage
        Why should convicted felons lose the right to vote? What really is the point? Once the sentence is served, the convict should be considered a free man again, with the same rights and responsibilities. If that is deemed inappropriate, he should still be in prison. Why have second class citizenship?
        • by nosferatu1001 ( 264446 ) on Wednesday October 27, 2010 @09:27AM (#34036516)

          Agreed. One of the more bizarre laws the US has that seems certain to incite continual negaitve feelings towards a government you can never participate in.

          Utterly stupid

        • by Nidi62 ( 1525137 )
          Because it is part of the punishment. Most felony convictions are regarding violent or property crimes. These are not simply crimes against individual people. They are crimes against the society as a whole and the norms and ideals it upholds. By committing crimes of this type, you are saying you no longer wish to be part of this society and, as such, you no longer have the right to the privilege that is voting. You say that, once they get out and are free, they should have all rights restored. Why? B
          • Yea because this could never be abused? Removing the felons right to vote effectively removed him from the process that put him there in the first place. Wikipedia puts the numbers at 0.75% of the total population or 2.42% of the potential voters. If nearly one in 40 people has so broken that social contract that they can no longer be allowed to involve themselves in society you might want to rethink that social contact. As to willful action you have to assume that every conviction is just but we know th

        • by dbet ( 1607261 )

          Why have second class citizenship?

          Because then you can make illegal things that certain people like to do, people you don't want voting.

      • The taxes are paid by the customers, not by the sellers. As the customers reside (and purchase) in the state, they must pay.

        I don't think this part of it was ever an issue. The problem is that states now want Amazon to collect that tax, effectively making it a tax on them, rather than the customers.

      • Also, I'd like to play a little with your "No taxation without representation". Are you suggesting that when a convinted felon loses his/her right to vote, s/he also loses his/her duty to pay taxes? Maybe crime pays, after all.

        Wow, way to red herring this right off a cliff. "No taxation without representation" was not invented by a slashdot poster, it was the idea behind the boston tea party, where taxes were being sent to England and the colonies were being ruled remotely with having much say in the way t

      • >>>The taxes are paid by the customers, not by the sellers.

        Okay yes you're right, but why do I have to comply with NC Law? They are a foreign government to me, and they have ZERO authority to order me to file a tax return. Just as China or Canada has zero authority to order me.

        NC might pass a law that says, "You must collect 6% tax and remit the money to us by April 15 each year," but I am not bound to obey.
        Fuck them.

        • China or Canada doesn't have zero authority over you if you go to their territory and make a purchase on a shop there, regardless of you being a citizen or not of the country.

          Likewise, when you make a purchase on a shop located on NC, you are "going there" (figuratively, in case of digital purchases) and buying something on a shop located in their territory.

          Now, if sending TCP/IP packets to their territory is the same as physically going there is subjective, but it's not absurd to consider it true.

          • Ok, I've misunderstood the problem. Disregard my comment.

          • by sjames ( 1099 )

            If I set up a brick and morter in my home state and someone from NC buys something at it, they bought it in MY state, not NC. That is fairly clear. NC may have laws applying to it's citizens that say they must declare that to them for tax purposes, but I am not one of those citizens.

            If I build my store in NC, then they may apply their tax law to me.

            From a practical perspective, there's a zillion little towns all with their zillion tax laws. Nobody can even keep track of them all much less deal with the pape

    • by xaxa ( 988988 )

      A French person pays Polish VAT if they buy something in Poland (whether online from a Polish business, or in a shop in Poland).

      • >>>A French person pays Polish VAT if they buy something in Poland

        Which should not be. Let's suppose the Polish government goes slightly mad, and raises the Polish VAT to 50%. How is the French person supposed to protest that? He has no voice in the polish legislature to say, "That's ridiculously high." The french citizen is powerless to change the law/tax that he is subject to.

        QED - no representation == no authority. The polish government has no (legitimate) authority over non-polish resident

        • Tell this to all the local governments that have jumped on the bandwagon of taxing travelers to the max. It is infuriating to be hit with a 19% sales tax on a rental car and motel room when everything else is taxed at 9% or less. But they're all doing it, and all at slightly different rates.

        • by xaxa ( 988988 )

          >>>A French person pays Polish VAT if they buy something in Poland

          Which should not be. Let's suppose the Polish government goes slightly mad, and raises the Polish VAT to 50%. How is the French person supposed to protest that?

          By not buying things from Poland.

          "No taxation without representation" is a different issue. Imports and exports to America were taxed, and the money taken by the UK. In the French-Poland case, exports are being taxed by Poland, and in a Polish-France case exports are being taxed by France.

          Are you aware that if you shop in Poland you can reclaim the VAT you've paid once you leave the EU and return to the USA? Just keep hold of the receipts and show the goods (to prove you're exporting them) at the airport.
          If

          • >>>By not buying things from Poland

            That sounds reasonable, unless it's a product only Poland makes. IMHO I should not have to pay Poland's tax unless my body enters their jurisdiction.

      • Comment removed based on user account deletion
    • Re: (Score:3, Insightful)

      by nedlohs ( 1335013 )

      How exactly does whether Amazon has to send details of NC customers to the NC government affect sellers? And how does it have anything to do with you being subject to taxation?

      Sure NC is trying to do that, but this particular ruling has nothing to do with it at all.

      • >>>How exactly does whether Amazon has to send details of NC customers to the NC government affect sellers?

        Knowing how amazon operates, they'll probably make US do the paperwork ("remember to file your NC list of your customers by April 15"), and I don't feel like it.

        • No they won't, since that isn't what the case is about.

          But feel free to make up ever more outlandish things this might end up making you have to do.

    • You keep mentioning "no taxation without representation" in comment after comment, because you don't live in North Carolina, but the issue in question is specifically about North Carolina trying to collect sales tax from North Carolina residents.

      From the friggin judgment:

      As part of an audit of Amazon, the DOR, whose secretary is Defendant Lay, sent a request on December 1, 2009 to Amazon seeking “‘all information for all sales to customers with a North Carolina shipping address by month in an electronic format for all dates between August 1, 2003, and February 28, 2010.”

      So I honestly ask: what on earth are you babbling about? Or do you just like citing 'Merican phrases at random regardless if they're appropriate to the circumstances in question?

      • Re: (Score:3, Insightful)

        >>>what on earth are you babbling about?

        Assuming the court allowed states to collect this info, I would be required to keep a list of all my customers in 2011, separate them, and mail-out 51 letters to the 50 states plus DC. That would require several days worth of labor on my part, and that is "taxing". I should not be taxed by governments where I have no representation in their legislature.

    • by allcar ( 1111567 )

      It makes as little sense as saying a Frenchman should have to pay income tax to the Polish government.

      Via the magic of the EU, that's exactly what happens, isn't it. The Frenchman pays his taxes to the French government, who then give it away to the EU, who then donate it to the poorer governments, such as Poland.

    • no taxation without representation eh?

      will you exempt minors from paying sales tax?
      will you exempt h1-b visa holders from paying income tax?
      will you exempt corporations from all taxes?
      will you exempt people who order things from the US from any export duty?

      your argument while grandiose and part of all Americans common heritage, is not workable.
      it is too simple.
      Yes, you can argue that corporations have representation via Lobbying (and I think they do as well)
      Same as the British argued that the members of the

    • The case is not about you paying sales tax to a foreign government (Carolina). It is about you paying sales or use tax to your own state. This applies to all mail order only companies. If a business has a presence in the state you are buying, you pay sales tax to your local state. If they don't, you pay use tax to your state. However, states have no way of what you are buying from out of state vendors, which is why they are wanting the information. For sales tax, the vendor collects it and remits it on

  • Huh.. (Score:5, Interesting)

    by EasyTarget ( 43516 ) on Wednesday October 27, 2010 @09:24AM (#34036476) Journal

    I must be mis-reading this..

    As far as I can tell, all that has been ruled is that the state should not receive a lit of -what- books you have purchased.

    Nothing to prevent them knowing the value of the books you have purchased, with the titles redacted, so you can pay your fair share of taxes like the rest of us.

    Yet people here seem to be discussing things off at a tangent to this (like whether books should be taxed at all, a totally different subject really), who would have imagined Slashdotters doing that ;-)

    • NC Legislature (or Canadian Parliament) (Or Chinese government): "You must compile a list of all your customers and provide them to us."

      ME: "No."

      The end. These governments have no authority to make me obey their law, because I am not a resident. Neither do I have a voice in their legislature to protest the law. The law I quoted is a nullity. It has zero power over me.

    • by ideonexus ( 1257332 ) * on Wednesday October 27, 2010 @09:52AM (#34036710) Homepage Journal

      You are correct that things have gotten off topic, and a lot of people are missing what's actually going on here; however, it's not as simple as giving purchases with titles redacted...

      Amazon is being sued to pay the taxes for purchases in North Carolina, not for everyone in America. They furnished NC's Department of Revenue (DOR) a list of all sales with ASINs (Amazon's Unique Identifier for products) from 2003 - 2010. NC needs the details because different kinds of products have different sales taxes. NC's DOR demanded that Amazon also provide the Bill-To and Ship-To information, which Amazon refused to do as this would violate the First Amendment by identifying the details of what NC residents were reading, watching, and listening to.

      This is where it gets hazy... The DOR offered to give the original data back in exchange for data that identified people, but not the details of what they purchased, but the original data would be kept on the DOR Secretary's computer, because they needed some of that for... I dunno, it's hazy legalese. Amazon stated that the only way they have to identify what was purchased was ASINs, which would identify the products, so no deal.

      The DOR admitted that this customer-identifying data would add nothing to establishing Amazon's tax-liability, but they still wanted it. Amazon got backing by the ACLU and the Judge ruled against the DOR.

      This should be case-closed, but, as a resident of North Carolina, I'll be keeping an eye on it, and will be writing an irate letter to the editor of my local paper for not covering this story. Thanks Slashdot!

      • Re: (Score:3, Informative)

        by spidrw ( 868429 )
        Amazon isn't being asked to pay taxes at all. NC would certainly prefer that Amazon collect and pay them, but what NC wants is purchase details so that they can send tax bills to NC residents (you and me) for un-paid use taxes. Amazon has no NC tax liability - we do.
    • Basically, they need the category data - book / clothing / housewares / etc. That allows them to figure out what is taxable and what isn't. For instance, in NJ, groceries and clothing are not taxed, but household items, books, etc. are. So you go to the grocery store, and the 5 cases of Coke aren't taxed, but toilet paper and shampoo are. Alcohol is taxed twice - there's an alcohol tax built into the price, and a sales tax on the total (that changed about 10-12 years ago, it used to just be the alcohol tax,

  • North Carolina's problem, like many states, is an over-reliance on state sales taxes. If they would reduce their sales tax to zero and increase other taxes to compensate, they would make their own businesses more competitive with Internet retailers like Amazon.com and eliminate the need to try to tax them. At the same time, this would encourage commerce and eliminate a regressive tax.

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