Amazon Sues North Carolina Over Tax Collection

Amazon isn't giving up without a fight in handling North Carolina's attempts to get the company to collect sales tax.  Amazon filed suit in the Western District of Washington when North Carolina allegedly asked Amazon for state resident information in an attempt to collect taxes directly from them.  Yes, states such as North Carolina are strapped for cash to the point where it comes to something like this.  The first attempt to get Amazon to collect sales tax came when the state enacted a law that manufactured a nexus between the state and Amazon via the affiliates program.  Affiliates are those who advertise Amazon products on their web sites in return for a percentage of sales those ads generate.  Amazon wasted no time in throwing North Carolina affiliates overboard as a way to avoid collecting the sales tax.  If anything, North Carolina lost a little in tax revenue as those in-state sites will now generate a little less income.  Amazon claims the suit violates its and its customer's First Amendment and privacy right.

The Supreme Court held in the Quill v. North Dakota case (Opinion by Justice Stevens) that the only way a state could compel an out-of-state company to collect sales tax is if it had a nexus with the state, such as local brick and mortar stores or sales facilities.  Most Internet sites do not, unless they have a warehouse or other facility located in the state.  This opinion vexed states ever since.  Congress hasn't helped their cause as it declines to pass a law mandating an Internet sales tax collection. 

The Tax Foundation has a short list of similar litigation and the issues these cases present, here.  Coverage is in the Wall Street Journal.  [MG]