North Carolina mines for Amazon tax

In a State’s Search for Sales Tax, Amazon Raises Privacy Concerns

Excerpt:

NORTH CAROLINA last month began an audit of online businesses, assuming that millions of dollars in sales taxes owed to the state had disappeared into the Internet.

“This is really an issue of fairness and equity for small businesses, the brick and mortar, corner store operations,” said Kenneth R. Lay, the state’s secretary of revenue. “These businesses are at a competitive disadvantage when they have to collect sales taxes that other businesses do not.”

The response of one of those online businesses, Amazon.com, was succinct: back off.

In a complaint filed in Federal District Court in Seattle, the company said that the audit violated the First Amendment and privacy rights of the customers, as well as the company itself.

The case offers a glimpse at the changed landscape of privacy in the United States. Under the old model, the law was meant to protect the public from a snooping government. And the government was generally the only entity with the resources to snoop on people in a systematic way.

Today, the online snooping (make that “data collection”) never stops. Can the old tools really prevent the government from closely monitoring its people when so much information is a mere Internet search away? And is the government the one we really need protection from?

Amazon’s lawyers say the Constitution protects the company so that it “may sell — and customers may read, hear or view — a broad range of popular and unpopular expressive materials with the customers’ private content choices protected from unnecessary government scrutiny.”

The complaint gave examples of books Amazon had shipped to North Carolina: “Bipolar Disorder: A Guide for Patients and Families,” by Francis Mark Mondimore, and “He Had It Coming: How to Outsmart Your Husband and Win Your Divorce,” by Stacy Schneider. The movies, the complaint said, included “Lolita,” “Brokeback Mountain” and “Fahrenheit 9/11.”

Comment: Earlier post

Can Minnesotans escape the "Amazon tax"?

The Sales Tax That Comes Back to Bite

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Time was when it was easy for citizens to avoid paying sales taxes on some purchases made online or out of state. Ebay and Craigslist wouldn't be as fun otherwise.

But skirting the law is getting more difficult. Now 24 states, plus D.C., are pricking shoppers' consciences with a special line on the tax return that requests a payment for sales taxes on any goods bought out of state, including those from online retailers—up from 20 states in 2008. Other states collect the tax in a variety of ways, some with special forms that taxpayers are supposed to fill out voluntarily. If, like many, you don't fess up, you may get a bill (see map).

States are trying to recoup some of the $20 billion or so they lose each year to online-sales-tax evasion. The gap exists for a quirky reason: States with sales taxes always have a "use tax" on items residents buy from out-of-state vendors. But a 1992 Supreme Court decision affirmed that out-of-state vendors don't have to collect the tax. It's up to taxpayers to track what they owe. Most don't.

"These rules are poorly understood and they make a lot of people mad," says Jim Eads, head of the Federation of Tax Administrators, a group of state tax officials. He points out that New Mexico even has a law on its books prohibiting enforcement of its use tax.

This year Kansas, Nebraska, West Virginia and D.C. added a line to their 2009 returns asking residents to pay use taxes, according to CCH. Many states warn against leaving the line blank and include a table of "suggested" contributions by income level. In New York, this works out to $78 for a return showing $200,000 of adjusted gross income. Items costing more than $1,000 are supposed to be handled separately.

Such piecemeal efforts will not be necessary if Congress passes a bill many states are pushing for: the Streamlined Sales Tax. States would harmonize their rules (but not necessarily their rates) and then collect tax on outbound sales and send it to the inbound state. So far 23 states have signed on, although holdouts include big ones like California and New York. Lawmakers seemed poised to pass the measure last year before they became preoccupied with health care, but the bill could return.

Minnesota Seeks "Amazon Tax"

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Minnesota has become the latest state to consider taxing consumers on internet sales by proposing the so-called "Amazon Tax." House Bill 401/Senate Bill 282 would require retailers with no physical presence in the state to collect sales tax on digital products purchased by Minnesotans and remit it back to the state.

Current federal law bars states from forcing businesses to collect sales tax unless they have a physical nexus in the state. Following New York's lead, the legislation would circumvent the intent of the lawby presuming that a company has a physical nexus if business is solicited through a third-party advertiser that is based in Minnesota.

Comment: Internet Tax Freedom Act. The Streamlined Sales and Use Tax