Hope You Saved Your Amazon Receipts

[tyketime]

This should be an interesting case to watch...

Amazon e-commerce tax fight heats up

North Carolina: Hey Amazon, we want your customer records for everyone that lives in our state. We want names, addresses, and a list of everything they've bought over the last eight years.

Amazon.com: Why?

North Carolina: We're going to send them tax bills for that stuff.

Amazon.com: Hell, no, North Carolina.

And so it has gone between the state of North Carolina and Amazon.com over the issue of sales taxes for goods sold to residents of the state since 2003. North Carolina says it wants back taxes for purchases that were sold tax-free via the online merchant. Amazon says it's not going to give up that information, as it violates the privacy and First Amendment rights of its customers.

Now it's up to a federal judge in Seattle to figure out whether the demand is even legal. The company is hoping North Carolina drops the request altogether, seeing as how Amazon has no "nexus" — a physical presence in the form of an office building or warehouse — in the state. This exempts Amazon, from a federal standpoint, from collecting sales tax there.

It doesn't, however, exempt buyers from having to pay a use tax on goods they purchase from out of state. Most states have use-tax laws. Technically, we're all supposed to declare such purchases on our income tax returns and pay the appropriate tax on them, but in reality, few people ever do this. North Carolina, hurting for revenue like all the other states, probably figures it has hit on a simple solution to such behavior — that is, forcing Amazon to give up its customer data so it can simply bill residents directly.

Few are happy with this move, as it clearly smacks of Big Brother tactics. Never mind the extra tax bill: Who among us wants the government armed with a list of our purchases from the last decade?

The case sits with a judge for now, but I'm not altogether hopeful. The courts have generally been friendly toward states trying to weasel their way into e-commerce taxation, as evidenced by New York's enacting and upholding of a law that allows it to tax residents for all online purchases by considering "affiliate sales program" members — website owners who host links out to merchant sites — to be a nexus. Other states have efforts similar to North Carolina's in the works. All it takes is one domino to fall and the rest of the states are likely to go along with it.

Be afraid.

[Drake]

The whole "you must pay us sales tax on all the money you spent outside of our state" concept is stupid.

Now, if I could flash my driver's license in Colorado and be exempt from Colorado state taxes while I'm on vacation, then my state and I have a point at which we can begin negotiating. Short of that, they can suck it.

[Drake]

Reminds me: My mother-in-law actually got a $600 excise tax bill from Indiana a couple of years ago. She is a resident of Indiana, but lives in Arizona and buys cigarettes from some Reservation-based tobacco company.

Apparently the state got a hold of their customer manifest and retroactively taxed her for the excise tax they missed out on from her not buying cigarettes in Indiana...where she doesn't actually live 9+ months out of the year.

[Wolfpack]

This is some continuing horse manure between the state and Amazon that started when the state basically said Amazon had to collect taxes for the "associates" that were doing business in the state. Amazon then cut off the associates to remove any potential legal standing to collect taxes. Apparently the state has decided to up the ante a bit, but I don't see how they can do this without demanding a similar collection from every single e-commerce website in the entire world since the principle should be the same for all of them. For this reason and others (like gift-giving) the "use tax" is pretty much unenforceable, IMO. So, in the end, this is the state government being nothing more than petty and vindictive because Amazon isn't doing what they want them to do, to which I say, "Go Amazon!"

In my own case, I'll be mighty pissed if the state wins and sends me a back-tax bill, especially since there's no way to distinguish between the things I've bought for myself and the things I've bought as gifts for others, particularly my sister's family that lives in South Carolina and my brother who lives in Colorado (and as such, shouldn't be subject to "use taxes" since they don't live here nor use their gifts here).

At any rate, don't expect anything to be enforced any time soon as Amazon likely would carry the fight to the Supremes if they don't get their way, which would settle the legality of use taxes at that point.

[SackAttack]

I'm not a lawyer, but it seems to me that, use tax or no, if there's no presence in the state, North Carolina can't tax the transaction, even if the end user is a resident of the state. It's a purchase made, effectively, across state lines, and the Constitution says that's the purview of Congress.

I understand why they're trying, but I can't imagine it's going to end well for them.

[Logan]

I hope you fuckers have to start paying like I do.

[gstelmack]

Ever since they added the line, I've paid the North Carolina use tax using their estimated amount. It hasn't been all THAT much, helps me avoid any future troubles, and if it gets knocked down as unconstitutional I'll get my money back (a few years ago NC had to send refunds out for a tax they should not have charged) but I'll be laughing if they get the records and find out they owe me money back because I paid too much...

[Celeval]

Hopefully our H&R block person has been doing the same, Greg.

That said - since it's a choice between estimated and real, and we went with estimated, I'm betting that's reason for them to say "oh, well, if you had the proof then, you could have itemized" and they won't refund.

[gstelmack]

I wonder when they'll start going after NewEgg.

[Swaggs]

I had to pay (well, I guess I could have not paid and then worried about it because that is the kind of guy I am) "usage" taxes on our online purchaes in the state of West Virginia. I think it ended up being a little under $300. I wish they would just collect at the point of sale. I understand why they do it -- otherwise, local businesses have an even greater disadvantage over online distributors.

[ISiddiqui]

Originally Posted by Swaggs

I understand why they do it -- otherwise, local businesses have an even greater disadvantage over online distributors.

Exactly. While I do like the not having to pay sales tax of Amazon purchases, it becomes somewhat problematic to local businesses. People like to complain about Walmart coming in and destroying local businesses, but models like Amazon are far more damaging.

[Samdari]

Originally Posted by gstelmack

I wonder when they'll start going after NewEgg.

When they appoach 5% of amazon's sales?

[QuikSand]

Originally Posted by SackAttack

I'm not a lawyer, but it seems to me that, use tax or no, if there's no presence in the state, North Carolina can't tax the transaction, even if the end user is a resident of the state. It's a purchase made, effectively, across state lines, and the Constitution says that's the purview of Congress.

I understand why they're trying, but I can't imagine it's going to end well for them.

Well, the law here does make a meaningful distinction between two things:

-an obligation of a seller to collect sales tax

-an obligation of the buyer to pay a companion use tax

Your argument above about nexus generally follows the case law with regards to the first of the above... that historically the state needs to have nexus to require the vendor to collect. However, states have had use taxes for decades, without any meaningful challenge to their constitutionality. Not to say it's impossible that they one day get struck down, but it doesn't seem likely -- basically the courts have said that the states have the power to levy a tax on something brought into the state for its final use. And that applies to a company buying a freight train full of pig iron, right on down to me buying taxable items from an online vendor.

The article above does a better than average job of laying out the issue, but the more recent wrinkle in this is that states are asserting that companies like Amazon actually now do have a nexus in their state, by virtue of having a relationship with other companies who physically locate there. So, I am guessing that what NC is essentially saying in its laws is not that they want to require Amazon to withhold taxes even without nexus, but rather that their affiliate relationship with NC businesses create sufficient nexus for them to at least disclose, if not collect and remit. This argument is pretty unsettled, by pretty much everyone's accounting. As our Empire State friend above noted, I believe NY was the first to try this approach.

[kcchief19]

A tangent to this is the horrific streamlined sales tax debacle that was thrust upon businesses and consumers. The concept was that companies would "voluntarily" collect sales tax on interstate sales.

However, the debacle was that the "streamlined" sales tax means you collect the sales tax on where the product was delivered, not where the produce was sold. What that means for retailers is that they must know the sales tax for every jurisdiction in the "streamlined" sales tax rate. In Kansas, every city and county has its own sales tax rate and some school districts and other improvement districts have their own rates, which means a single city can have multiple tax rates.

It's a horrible burden for businesses such as florists or other delivery-based businesses, because under the "streamlined" sales tax rate they are expected to collect tax on the destination, not the point of sale. It doesn't apply to cash-and-carry sales, which can be taxed at a single rate.

It didn't hurt out-of-state retailers because they just told Kansas to blow it out their ass. I know of a couple of businesses who closed their Kansas operations and setup exclusively in Missouri so they could sell "sales tax free" to Kansas rather than pay the jacked-up streamlined taxes.

[SackAttack]

Originally Posted by QuikSand

Well, the law here does make a meaningful distinction between two things:

-an obligation of a seller to collect sales tax

-an obligation of the buyer to pay a companion use tax

Your argument above about nexus generally follows the case law with regards to the first of the above... that historically the state needs to have nexus to require the vendor to collect. However, states have had use taxes for decades, without any meaningful challenge to their constitutionality. Not to say it's impossible that they one day get struck down, but it doesn't seem likely -- basically the courts have said that the states have the power to levy a tax on something brought into the state for its final use. And that applies to a company buying a freight train full of pig iron, right on down to me buying taxable items from an online vendor.

The article above does a better than average job of laying out the issue, but the more recent wrinkle in this is that states are asserting that companies like Amazon actually now do have a nexus in their state, by virtue of having a relationship with other companies who physically locate there. So, I am guessing that what NC is essentially saying in its laws is not that they want to require Amazon to withhold taxes even without nexus, but rather that their affiliate relationship with NC businesses create sufficient nexus for them to at least disclose, if not collect and remit. This argument is pretty unsettled, by pretty much everyone's accounting. As our Empire State friend above noted, I believe NY was the first to try this approach.

Yeah, but as I recall, didn't Amazon disassociate themselves with their New York-located vendors after that happened?

I mean, it seems like the net outcome here isn't going to be Amazon going "Gosh, you got us. Sorry, guys," but one of the largest internet presences ceasing affiliate relationships with vendors located in North Carolina, which, presumptively, would hurt North Carolina's income tax receipts, since those vendors would then be doing less business.

I'm not trying to suggest that North Carolina doesn't have a leg to stand on here - only that continuing to pursue Amazon in an effort to recover sales tax or to gain information about the end users to try to collect the use tax from them is, ultimately, not going to be a beneficial scenario for the state. Short-term gain, possibly, but long-term loss, almost certainly.