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Cash strapped N.C. looks to milk money out of citizens in its battered local economy

When it comes to internet purchases, you're supposed to individually list them on your yearly tax return and then pay back sales taxes to the state.  Of course, few people do this.  Now the government of North Carolina and other states are battling and other e-tailers to get these records. this week filed suit against the North Carolina state government -- specifically, the Department of Revenue (DOR) -- claiming that the state's demand for records of virtually every North Carolina resident who has purchased anything from Amazon since 2003 was not only unreasonable, but a violation of privacy.

Amazon writes in a filing for the case, "In re: LLC vs Kenneth R. Lay", Case No. 10-00664, U.S. District Court, Western District of Washington, "[T]he DOR has no business seeking to uncover the identity of Amazon's customers who purchased expressive content, which makes up the majority of the nearly 50 million products sold to North Carolina residents during the audit period."

If the case is lost, Amazon may have to turn over the records of millions of its customers in North Carolina.  Those individuals who purchased from Amazon (but did not report their purchase on their tax returns) might be audited and face civil penalties. At the very least, they would likely be expected to repay back taxes on the items they failed to report to the government.

In North Carolina, failing to pay state sales taxes is handled as a civil infraction.  Under the codes 105 236(5)c. and 105 236(5)a., citizens can face additional fines for dodging state taxes.  The penalty would likely be to pay 25 percent more tax, except on small items, which would require taxpayers to pay only an additional 10 percent fine.

The fight is the latest in the growing trend of states hungering for internet tax revenue.  Many states have passed or are debating laws that would tax digital downloads such as those offered by Amazon, Steam, Apple's iTunes store, or others.  While many in the public have complained about excessive taxation on the federal level, it is actually the states that have been pushing the most for bigger taxes of late.  The federal government has made some mild efforts to fight taxation of the internet.

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First step
By esoteric01 on 4/20/2010 6:08:07 PM , Rating: 2
Wouldn't a reasonable first step be to try educating people that these taxes do exist and maybe adding a line to the state tax form asking how much you spent on internet purchases? Why do these states need to jump right to strong arming e-tailers for records and invading our privacy?

RE: First step
By zxern on 4/21/2010 1:25:41 AM , Rating: 2
Having processed tax forms for various states in the past, I can tell you a surprising number of people have difficulty telling the difference between first name and last name fields. I guarantee these people have no idea what a use tax is.

RE: First step
By wempa on 4/21/2010 2:24:03 PM , Rating: 2
I would be OK with them taxing internet purchases as long as the SELLING state gets the extra money. That would be an incentive for a state to have more online retailers and, thus, more overall competition rather than an incentive to just have more people within your state.

RE: First step
By Moishe on 4/22/2010 3:52:36 PM , Rating: 2
This is exactly what happens.

Option #1
how much did you spend, then apply this calculation
Option #2
If you don't know how much you spent, use this table to calculate your tax. (The table is based on your income.)

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