May 3, 2010
Always seeking new tax revenue, some states are renewing their efforts to tax online retail sales. But online retailers, particularly Amazon, have frustrated state revenue collectors before and continue to fight new taxes with lawsuits charging privacy invasion.
Consumers are required in most states to pay sales taxes on items they purchase online, but few consumers actually know this. It's almost impossible for states find out which of its citizens are purchasing items online and what they owe in online sales taxes. Leading online retailer Amazon it trying to make it harder for the states to collect because of its litigation challenging North Carolina's attempt to get Amazon records of its sales to residents of that state. Faced with a new online sales tax in North Carolina last year, Amazon ended its partnerships with scores of small business entrepreneurs rather than agreeing to pay the tax. The company then argued it didn't have nexus -- physical presence in the state -- and therefore shouldn't be required to pay the sales tax. Not only were the taxes unpopular, but the state saw some of its small businesses get hurt when Amazon dropped them as partners. North Carolina wanted Amazon to supply it with information on its residents' online purchases, but Amazon countered with a lawsuit claiming the state's request was an unlawful breach of privacy. North Carolina's American Civil Liberties Union has sided with Amazon on the issue. "Consumers have a reasonable expectation of privacy and a First Amendment right to read, hear or view a broad range of popular and unpopular expressive materials without their choices being subjected to unnecessary government scrutiny," said North Carolina ACLU executive director Jennifer Rudinger. She added that the state's demands on Amazon "threaten to have a major chilling effect on future consumers' expressive choices." The state replied that it only seeks to know the total amount of goods purchased online and not the actual identity of individual items. The issue is still up in the air while awaiting a decision from the courts.
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