Amazon Fights North Carolina's Audit Request
Amazon is fighting North Carolina's audit request for personal purchaser / customer information. Amazon filed the complaint in U.S. District Court for the Western District of Washington, Case No. 2:10-CV-00664-BAT on April 19, 2010.
Within the complaint, Amazon states it already complied with North Carolina's request by providing detailed information about millions of purchases made by North Carolina customers. Amazon provided responses to all of the data fields specified by the North Carolina Department of Revenue (DOR) which include: order ID number, seller, ship-to city, county, postal code, the non-taxable amount of the purchase, and tax audit record identification.
The NC DOR wants the following additional information: bill to name, bill to address, ship to name, ship to address, product/item code or description.
Amazon states the collection and disclosure will impose a significant burden on Amazon. Amazon also states the disclosure of Customer data will identify to the DOR the identities of customers who purchased certain items that may be subject to government scrutiny if exposed. Yet the identity of any Amazon customer is irrelevant to the DOR's audit of Amazon's tax compliance.
Therefore, Amazon is asserting the privacy and First Amendment rights of itself and of its customers should be protected, and seeks a declaration that the DOR's ongoing demand for information violates the rights of Amazon to sell, and its customers to purchase content free from government intrusion.
Is Amazon's complaint valid? Do they have a point? Maybe.Other States and Similar Requests
Since I am not involved with the audit, I can't say as to why North Carolina made the request. I can say I have seen other states make similar requests and it is not irregular for those requests to be satisfied.
Most states would make this request in order to be able to identify the customers or purchasers who made taxable purchases, and then to confirm the purchasers filed and paid the appropriate "use tax," if necessary. Therefore, Amazon is probably correct in that the information request is not necessary for NC to audit Amazon. It is however, necessary or helpful to NC to be able to audit purchasers for use tax compliance.
I know other companies have received similar requests from other states recently. Every state is going after use tax compliance any way they can. Maybe rightfully so, since use tax is due to the states. However, use tax has always been a difficult tax to enforce against "individual" taxpayers. For businesses, use tax is always a source of audit concern and adjustment.
If you receive a similar request, will you provide the information or will you pause, and fight it?Will Amazon prevail? Only time will tell.
Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State Tax Notes entitled, "The SALT Effect." For more info, visit his website: www.leveragestateandlocaltax.com
You can reach Brian at firstname.lastname@example.org.
Because state and local taxes are deceptively simple and endlessly complicated.