Recently by Declan McCullagh: Census Time Heightens PrivacyConcerns

Amazon.com filed a lawsuit on Monday to fend off a sweeping demand from North Carolina’s tax collectors: detailed records including names and addresses of customers and information about exactly what they purchased.

The lawsuit says the demand violates the privacy and First Amendment rights of Amazon’s customers. North Carolina’s Department of Revenue had ordered the online retailer to provide full details on nearly 50 million purchases made by state residents between 2003 and 2010.

Amazon is asking a federal judge in Seattle to rule that the demand is illegal, and left open the possibility of requesting a preliminary injunction against North Carolina’s tax collectors.

"The best-case scenario for customers would be where the North Carolina Department of Revenue withdraws their demand because they recognize that it violates the privacy rights of North Carolina residents," Amazon spokesperson Mary Osako told CNET.

Because Amazon has no offices or warehouses in North Carolina, it’s not required to collect the customary 5.75 percent sales tax on shipments, although tax collectors have reminded residents that what’s known as a use tax applies on anything "purchased or received" through the mail. The dispute arose out of what had otherwise been a routine sales and use tax audit of Amazon by North Carolina’s tax agency.

A spokeswoman for the North Carolina Department of Revenue said she would have to review the lawsuit before answering why the tax agency needed Amazon customer information. "Any comment at this time would be premature," Beth Stevenson said in an e-mail message.

Amazon did provide the state tax collectors with anonymized information about which items were shipped to which zip codes. But North Carolina threatened to sue if the retailer did not also divulge the names and addresses linked to each order  in other words, personally identifiable information that could be used to collect additional use taxes that might be owed by state residents.

"Despite assurances from tax collectors that the era of Big Brother isn’t here, they seem to be doing a lot to rewrite the book for modern times," Pete Sepp, the executive vice president for the National Taxpayers Union, told CNET. "Unless Amazon succeeds, extraordinary demands like these could become the norm."

The 14-page complaint says that North Carolina tax collectors visited Amazon in Seattle last month in an effort to "obtain information from Amazon regarding Amazon’s sales to North Carolina residents." They hand-delivered a letter that amounted to an ultimatum: provide customer names by April 19 or face the consequences.

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April 21, 2010

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