North Carolina tax collectors have stirred up a controversy in their efforts to collect sales or use taxes on items sold online. When revenue officials asked Amazon.com for certain sales information in order to collect the use tax owed on sales to Tar Heel residents, Amazon refused, citing privacy and First Amendment reasons.
The giant retailer filed a federal lawsuit, claiming that the request violated citizens' First Amendment rights. The N.C. Department of Revenue denied requesting private information and said it needs only information such as a buyer's name, address and purchase price, not book or DVD titles. The resulting news stories focused on the privacy issue, whether it is an invasion of privacy to tell the state anything about what books N.C. residents have been buying or what DVDs or music selections have been clicked into those online shopping carts.
The state points out that Amazon already has furnished disks with information on 50 million purchases in a format that includes the purchase amount and county of destination as well as a great deal of other information that could be used to learn the title of each book, DVD or music selection purchase. It did not provide customer names as requested.
The Department of Revenue does not have the resources to manually extract the information it needs on amount of purchase and county of destination and does not want or need the other information. Amazon has, in fact, provided some of the very information it says it wants to protect.
In response to the lawsuit, the state writes: N.C. Revenue simply does not need the level of detail provided by Amazon. It has absolutely no interest in Amazon's customers reading habits, their religious or political beliefs or sexual orientations.
They just want the basic information needed to collect the taxes owed on those online purchases. If Amazon provided the information requested, a person's right to privacy would be protected because the state would not know specifics about what book or DVD was bought, just the purchase amount and the information required to compute the correct amount of tax owed.
We are confident that the department will protect the confidentiality of the taxpayer information, as required by law, using it only to collect use taxes. It already protects information about personal income and other information provided on the tax returns from millions of N.C. residents.
This is not about privacy or the First Amendment, but about tax fairness.
Every time you or I order a book from Amazon, we owe a use tax that is the same as the sales tax. The difference is the method of collection. If a seller such as Amazon does not collect the sales tax, the buyer is supposed to pay the use tax on items purchased out of state for use in state. But many do not pay the tax, and that burden just gets shifted elsewhere. North Carolina and its cities and counties are losing about $190 million annually from this failure.
No matter where or how you buy the book or blouse, you owe a tax. Is it fair for us to ignore the tax when we shop online, but force our local merchants to collect it? Is it fair for some to always pay the sales tax because they choose to buy locally and others to save that 7.75 percent (or more) on most purchases? Remember also that some of us pay the use taxes on online purchases on our state income tax returns, as we are supposed to do.
Federal court decisions prevent the states from requiring businesses to collect sales taxes on most online or remote sales. Until the courts recognize modern economic reality, or Congress fixes the problem, the use tax remains in place as the alternative. The N.C. Revenue Department is doing its job and enforcing the tax laws when it seeks what is due.
Few of us are enthusiastic about paying sales and use taxes, but we all ought to agree that it's fair to enforce the law and collect the tax from everyone who owes it.
S. Ellis Hankins is the executive director of the N.C. League of Municipalities. David F. Thompson is the executive director of the N.C. Association of County Commissioners.
