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 Amazon.com
and other e-tailers to get these records.Amazon.com this
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: Amazon.com 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
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
taxation of the internet.
quote: In this case we decide whether North Carolina's "intangibles tax" on a fraction of the value of corporate stock owned by North Carolina residents inversely proportional to the corporation's exposure to the State's income tax violates the Commerce Clause. We hold that it does.
quote: But because North Carolina has no general sovereign interest in taxing income earned out of state, Maryland v. Louisiana teaches that the Secretary must identify some in-state activity or benefit in order to justify the compensatory levy. Indeed, we have repeatedly held that "no state tax may be sustained unless the tax . . . has a substantial nexus with the State . . . [and] is fairly related to the services provided by the State."The Secretary's theory is that one of the services provided by the State, and supported through its general corporate income tax, is the maintenance of a capital market for corporations wishing to sell stock to North Carolina residents. Since those corporations escape North Carolina's income tax to the extent those corporations do business in other States, the Secretary says, the State may require those companies to pay for the privilege of access to the State's capital markets by a tax on the value of the shares sold. So, the Secretary concludes, the intangibles tax "rests squarely on `the settled principle that interstate commerce may be made to pay its way.' "The argument is unconvincing, and we rejected a counterpart of it in Oregon Waste, where we held that Oregon could not charge an increased fee for disposal of waste generated out of state on the theory that in-state waste generators supported the cost of waste disposal facilities through general income taxes.
quote: The statute exempted the use of any article that had already been subjected to a sales tax equal to the use tax or greater, so that the use tax effectively applied only to goods purchased out of state. Although the use tax was itself facially discriminatory, we held that the combined effect of the sales and use taxes was to subject intrastate and interstate commerce to equivalent burdens. "`There is no demand in. . . [the] Constitution that the State shall put its requirements in any one statute,' " we said; rather, "`[i]t may distribute them as it sees fit, if the result, taken in its totality, is within the State's constitutional power.' "