Privacy Trumps Taxes—Victory for Consumers in North Carolina…But What About Colorado?

by on October 26, 2010 · 1 comment

A federal judge sided with privacy over taxes yesterday, signaling a victory for consumers in North Carolina. Now we’re waiting to see if this also means victory for consumers and online companies that sell into Colorado.

A U.S. District Court in Seattle blocked North Carolina’s Department of Revenue from compelling Amazon to reveal the names and addresses of its customers so that North Carolina could go after them for not paying use taxes on purchases where they did not pay sales tax.

The North Carolina DOR had been auditing Amazon’s 2003-2010 sales into the state and had asked for “all information for all sales to customers with a North Carolina shipping address.” Amazon provided detailed information about the purchases, but the DOR demanded information about the customers making the purchases. Amazon balked and filed suit, and the ACLU even intervened to support Amazon. And they won.

The court was clear that states cannot compel companies to disclose the purchasing behavior of its citizens:

The First Amendment protects a buyer form having the expressive content of her purchase of books, music and audiovisual materials disclosed to the government. The fear of government tracking and censoring one’s reading, listening and viewing choices chills the exercise of First Amendment rights.

What does this have to do with Colorado? Everything and more.

#3 in our latest iAWFUL list of bad laws is Colorado HB 1193, a bill enacted earlier this year that forces out-of-state retailers to send the Colorado Department of Revenue an annual statement of the purchase data for each resident. It’s similar to the North Carolina “request” except that it applies to all companies that sell into the state (not just Amazon). It’s a much larger and broader attempt to get purchase information so that Colorado can send a tax bill to its citizens that don’t pay use tax.

Tax administrators nationwide are looking to duplicate the Colorado approach. But this ruling should send a big chill down the spine of tax administrators who were hoping to copy Colorado’s law requiring all out-of-state sellers to report purchases to the state. And hopefully the ruling gives a shot of energy behind the effort to repeal HB 1193.

Previous post:

Next post: