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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 Amazon.com and other e-tailers to get these records.

Amazon.com 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: 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 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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RE: Just A Matter Of Time
By tmouse on 4/21/2010 8:10:05 AM , Rating: 2
You are misinterpreting the decision. It does NOT say the use tax is unconstitutional. It says one state cannot force a SELLER in another state who has no presence in the receivers state to COLLECT the tax. It does not in fact address the buyers tax obligations at all. Quill corp.'s position was that they cannot legally collect sales tax for a state from another state and are not required to COLLECT a use tax, that would in fact be allowing one state to enforce its laws on a citizen under a separate jurisdiction and the court agreed with that interpretation (for now; they did say congress could change this). Now there are multiple decisions upholding the rights of states to collect taxes within their own jurisdictions. Use taxes are perfectly legal (I do not like them), they can only be imposed on items used within the state so for example if I buy a car in Delaware which has no state sales tax and keep it there I have no obligation to pay New York's use tax, BUT if I bring it to New York then I have to. Since a seller cannot determine where an item is going to be used it cannot enforce collection of a use tax. In the case of the Quill corp. its customers should be paying the use tax but Quill does not have to collect it. Now on topic it is not clear if Amazon could be compelled to supply purchase information to other states so they could enforce the laws on their citizens. My guess is it will be upheld at some point or congress will amend the interstate commerce laws to authorize it (not detailed information but taxable totals). Sales taxes are the only major alternative to property taxes to fund things like schools. Currently property values are in the dumpster and a second wave of devaluation is right around the corner. Sale taxes are also down , due in no small part to internet sales. Congress has held off allowing internet sale taxes to not cripple what was then a emerging industry. That time has passed (whether we like it or not). Its either increase property taxes (which is becoming near impossible in some areas), cut back in education, and other basic services or generate more sales tax revenue. Not sure how its going to be done, its either require sellers to supply individual's sale totals to the states so they can use their use tax authority, or some form of federal tax with the sellers reporting state totals so they get some share from the federal government. I do not like the idea of any of this but you cannot get something for nothing and nothing is certain except death and taxes.


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