Judge Rules North Carolina Must Narrow Amazon Data Request

On Monday, October 25, the U.S. District Court for the Western District of Washington in Seattle ruled that Amazon.com would not have to comply with the North Carolina Department of Revenue’s request for data revealing the identities of North Carolina customers and “detailed records of their purchases, including the expressive content.” The state had sought the information to assess Amazon.com’s sales tax liability.

U.S. District Judge Marsha Pechman ruled that North Carolina Department of Revenue’s data request threatened reader privacy, but she stipulated that her decision “does not prohibit the [Department of Revenue] from issuing a new request for information” with only general product information.

“It is heartening to see a court again rule in favor of readers’ First Amendment right to privacy,” said ABA CEO Oren Teicher. “It is clear from the ruling and the details of the case, many of which only came to light this week, that the North Carolina Department of Revenue’s second request for data from Amazon.com would have potentially compromised North Carolina customers’ right to privacy. That said, this situation could easily have been averted if Amazon.com had simply followed the state’s existing sales and use tax laws in the first place. We have never believed that sales tax equity compromises reader privacy, which Judge Pechman underscores in her ruling.”

Teicher added that ABA is urging the North Carolina Department of Revenue to refashion its request to ensure reader privacy and to “intensify its efforts to require Amazon.com to comply with existing sales tax laws.”

In December 2009, the North Carolina Department of Revenue requested data from Amazon.com including “all information for all sales to customers with a North Carolina shipping address by month in an electronic format for all dates between August 1, 2003, and February 28, 2010,” as part of an investigation into Amazon.com’s tax liability. In June, responding to a written inquiry from ABA, North Carolina said, “The Department has reiterated to Amazon and to the media that it is not interested in obtaining book titles and does not require this information in order to calculate the proper amount of tax. The Department does, however, require product codes or descriptions because this information is necessary to calculate the tax. Books, for example, are taxed at a different rate than food.”

In complying with this request, Amazon.com also included an Amazon Specific Identification Number (ASIN) for every purchase that permits access to specific, detailed product descriptions, including book titles. Amazon did this even though the company had, as described in the ruling, a five-digit tax code that includes generic product descriptions. In March 2010, the North Carolina Department of Revenue issued a second request for data from Amazon.com, which included the names of Amazon’s customers in North Carolina.

Teicher stressed that the collection of general purchase information, which is not title specific, for purposes of use tax enforcement does not violate the First Amendment, and that ABA continues to fully support the equitable enforcement of sales and use tax laws. “The surrender of customer purchase data is in no way mandated by the sales tax equity legislation passed in North Carolina,” Teicher said. “Affiliate nexus laws, passed in North Carolina, Rhode Island, and New York, require remote retailers to collect and remit the sales tax to the state and do not require that they submit customer data to any state entity.”