State of NC demands Amazon provide buyers names so they can be taxed!

[Gerry]

Amazon: NC Request For Buyer's Names Violates Free Speech
North Carolina Tax Collectors Demanded Information, Lawsuit Says

POSTED: 1:54 pm EDT April 20, 2010
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Online retailer Amazon.com Inc. said it's taking a stand for free speech by fighting an effort by North Carolina tax authorities to identify buyers.

The company said in a federal lawsuit filed in Seattle that North Carolina tax collectors have demanded information identifying the buyers of nearly 50 million books, movies, CDs and other items since 2003.

A spokeswoman for the state Revenue Department had no immediate comment Tuesday. Revenue Secretary Kenneth Lay was named in the lawsuit but was not immediately available for comment.

North Carolina requires residents to pay taxes on online items if they would pay sales tax in a store.

Amazon said revealing buyers' names would harm customers who may have bought controversial books or movies and would diminish future sales


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This is not good. Amazon recently halted affiliate participation to residents of North Carolina. The State of NC (and a few other states) wanted Amazon to classify NC affiliates as employees and withhold NC State income tax from payment. Instead, Amazon refused to do this bookkeeping task and simply released all NC affiliates.

Now this - in order that sales tax be collected and filed for online purchases from the consumer, the State of NC is now demanding that Amazon turn over a list of all buyers residing in NC. The reason is so the state can collect state sales tax for the purchase from every NC buyer.

This can only mean that the State would be preparing to audit nearly every NC resident to ensure that they did pay their fair share of state tax and would send out tax bills.

This is absurd and has to be one of the most wasteful uses of time, money, manpower, and resources. I can not imagine for an instant that any monies recouped would come close to equating the money spent on trying to find new revenue streams for the State coffers.

The worst part is we know it won't stop simply with the State of NC. New York is battling a proposed "iPod Tax" that would require state taxes to be levied on all downloaded music, apps, software, and such from the internet.

I guess it is time I contact my state legislators.

 

[south]

Good for Amazon! Not sure how / if they can win on a free speech basis, but you have to give them credit for trying.

 

[Gerry]

Good for Amazon! Not sure how / if they can win on a free speech basis, but you have to give them credit for trying.

Well, it appears to be a privacy issue (they relate that no one has any business being in someone else's business regarding products purchased).

 

[stock_post]

Desperate for money, they will come up with ways to tax.. and tax

 

[INFORG]

The attempt by NC to get Amazon to call affiliates "employees" was merely an end run to what you are seeing now. They tried to make you NC affiliates employees, so that they could say Amazon has a "presence" in NC, and therefore must collect sales tax for the state. That is why Amazon dumped the NC affiliates (and I believe RI, CO and a couple others).

I am glad that they are fighting this. If Amazon loses, (I don't see how), this would do some serious damage to online commerce. Can you imagine selling a product and having to know and collect the sales tax for 50 different states? With more states near bankruptcy, expect a lot more of them to try prying open the web looking for spare change.

eBay sellers, anyone that uses payPal or other online payment sites, etc. should all be wary of these attempts. It will end up costing small folks like us making a little bit of extra cash on the side.

 

[south]

Well, it appears to be a privacy issue (they relate that no one has any business being in someone else's business regarding products purchased).

Unless they are "criminals". Criminals have no right to privacy. If the people didn't pay any taxes on the purchases, that would make all of them lawbreakers, and amazon could be charged with blocking a criminal investigation, or something along those lines. Will be interesting to see how this plays out.

---------- Post added at 06:03 PM ---------- Previous post was at 06:01 PM ----------

Can you imagine selling a product and having to know and collect the sales tax for 50 different states? .

Not just that. What about getting occupational licenses in all the jurisdictions? Or filing corporate tax in every state? Etc etc etc..

I see a VAT coming.

---------- Post added at 06:06 PM ---------- Previous post was at 06:03 PM ----------

Desperate for money, they will come up with ways to tax.. and tax

They have begun. Among other things, I see LOTS of red light cameras going up around Miami. at $125 a pop, they're starting to rake in the money. And in a city like Miami, you will never get through the light without running it at times.

 

[Gerry]

eBay sellers, anyone that uses payPal or other online payment sites, etc. should all be wary of these attempts. It will end up costing small folks like us making a little bit of extra cash on the side.

There already has been talks of eBay sellers and those that use PayPal for receiving money will get 1099's. Actually, I am surprised this did not happen years ago.

NC actually tried to declare Amazon's NC affiliates as "contractors", therefore subject to State of NC withholding rules. Even though I am in NC, I was glad to see Amazon say no to this. They are not in the business to withhold, keep, declare, and file state income tax on behalf of the State of NC. Actually, again - a Form 1099-Misc. would have sufficed.

 

[INFORG]

There already has been talks of eBay sellers and those that use PayPal for receiving money will get 1099's. Actually, I am surprised this did not happen years ago.

NC actually tried to declare Amazon's NC affiliates as "contractors", therefore subject to State of NC withholding rules. Even though I am in NC, I was glad to see Amazon say no to this. They are not in the business to withhold, keep, declare, and file state income tax on behalf of the State of NC. Actually, again - a Form 1099-Misc. would have sufficed.

It was never about the income tax withholding or revenue though Doc, they just wanted to use this to establish "presence" and get Amazon to collect sales tax for them. The 1099-misc already makes sure NC gets the income action - small potatoes compared to the sales tax haul they are after.

 

[Gerry]

The NC state income tax form simply asks if I have purchased items online and then asks for an estimate in expenditures.

Since the inception of this on the form, it has been on the honor system. Naturally, I am confident in guesstimating that 90% (or more) never fill this in.

The idea that someone somewhere wants to pour though 7 years of data (yes, they asked Amazon to provide this information going back is 2003) is absurd. The amount of money wasted in an effort to collect what might amount to a few hundred thousand is absurd. I was trying to think of the process it would take to confirm that those on the list are even alive, dead, moved away, military, living in a foreign country - 7 years of data just to eliminate those that are still left around to collect from.

This process (or attempted process) makes no sense at all. Yet, it goes to show how desperate some states are to find new revenue streams. Budget shortfalls are starting to devastate some state programs.

 

[Gerry]

Not sure what the end result will be if the retailers do not honor the State of NC's wishes:

NC Offers Deal If E-Retailers Collect Sales Taxes

RALEIGH -- North Carolina tax collectors said Internet retailers have until August to agree to collect sales taxes the state says it is owed through the work of independent businesses.

The state Revenue Department on Friday pointed to research showing that North Carolina could lose about $162 million in uncollected sales taxes from e-commerce transactions this year, and more than $400 million over the next two years.

The question is whether North Carolina and other states have the legal stick to hit Internet retailers if the carrot of Friday's amnesty offer doesn't work.

North Carolina and other states said they are owed sales taxes because some state residents running their own Web sites posted links driving business to companies like Amazon.com and then collected a share of sales.


If the merchants like Amazon remain steadfast in saying no, does this mean there may be some blocking of the internet with merchants that do not participate?

I don't understand if this is a You have until August to comply or else.... as it is a rather vague statement.

 

[JB Lions]

Amazon isn't going to back down and since they dropped NC affiliates, NC has this little stumbling block to get thru:

"The U.S. Supreme Court ruled in 1992 that a state cannot force businesses to collect sales taxes unless they have a physical presence within that state."

 

[Gerry]

Amazon isn't going to back down and since they dropped NC affiliates, NC has this little stumbling block to get thru:

"The U.S. Supreme Court ruled in 1992 that a state cannot force businesses to collect sales taxes unless they have a physical presence within that state."

I am well aware of the arguments. But the internet opens up a new classification of what constitutes a physical presence. As such, the State of NC is parlaying the fact that affiliates were physically in the State of NC and should therefore have been classified as contractors.

As mentioned, the State of NC is demanding that Amazon turn over records of NC residents going back to 2003.

While all of this may be a moot point, obviously there is some teeth in the bite if NC, RI, and Colorado and more states that are challenging the current laws. This could easily end back up in the supreme court.

And, we are seeing that it is not just Amazon. Someone mentioned Overstock dumping NC. And I have been given the virtual "pink slip" from Sierra Trading Post.

 

[INFORG]

So far, it's been easier for the big affiliate programs to just dump NC affiliates. I'd like to see someone really fight this and get it settled - Doc is right that as of now, it is in limbo until a court case comes up that decides the issue of whether having internet affiliates in a state creates a "physical presence" and therefore requires them to collect sales tax. If states win, everyone else loses.

The everchanging landscape online is the only thing that keeps me from going full time in domains and development. Even if you are well diversified, a state level issue can wreck you overnight.

 

[JB Lions]

Yep, there's a lot to be decided. What these states fail to realize is they're probably hurting themselves because if it goes like Rhode Island, they're not seeing any new revenue and just hurting some small businesses in their states -

http://www.pbn.com/detail.html?sub_id=2976531d0961&page=1

Merchants are just dropping affiliates, no new revenue. This is causing some affiliates, some big ones to move, loss of revenue. Net loss.

 

[Gerry]

I'd like to see someone really fight this and get it settled

Amazon has chosen to fight this.

Here is an earlier thread regarding state tax liability:

 

[copper]

Not sure what the end result will be if the retailers do not honor the State of NC's wishes:

NC Offers Deal If E-Retailers Collect Sales Taxes

RALEIGH -- North Carolina tax collectors said Internet retailers have until August to agree to collect sales taxes the state says it is owed through the work of independent businesses.

The state Revenue Department on Friday pointed to research showing that North Carolina could lose about $162 million in uncollected sales taxes from e-commerce transactions this year, and more than $400 million over the next two years.

The question is whether North Carolina and other states have the legal stick to hit Internet retailers if the carrot of Friday's amnesty offer doesn't work.

North Carolina and other states said they are owed sales taxes because some state residents running their own Web sites posted links driving business to companies like Amazon.com and then collected a share of sales.


If the merchants like Amazon remain steadfast in saying no, does this mean there may be some blocking of the internet with merchants that do not participate?

I don't understand if this is a You have until August to comply or else.... as it is a rather vague statement.

That's (marked in bold red) so silly.
How can they say losing sales tax?
Sales are not happening within NC.
If you live in SC and buy something in NC, you are not paying tax to NC.
Simple as that. So, there are no lost taxes.

How to run a country - Tax it to death until it stop moving and actually dead

 

[Gerry]

The state of Virginia voted down a similar measure.

After reviewing what NC and several other states did, the key finding was that dumping affiliates, web masters, and site managers...this actually HURT the states economy and recovery effort by putting some full time managers out of work and decreasing income levels, ie - money to spend in that state!

I agree about the sales tax issue in red - could lose is not relevant and a non issue especially if the seller is charging sales tax or paying income taxes on income he has received. If I am ordering something in Wisconsin, the seller in Wisconsin will end up paying state income tax on revenue received.

Now, NC may somehow insist that I collect sales tax on every sale that I make (regardless of where the buyer is located) and that will further hurt online businesses.

I prefer to work with 1099's and just straight up claim income and reduce that by expenditures/expenses.

 

[DNabc]

Sales tax is a "drag". I have to pay VAT (european sales tax) of 20% (my portuguese rate, some countries have even higher taxes) even on non-european shops/companies.
Clickbank charges this, Godaddy auctions as well, etc etc.

And when I'm bidding on a domain at TDNam / Godaddy Auctions, against a person who doesn't have to pay for any "sales" tax, this isn't good for fair competition as well because I know I will pay 20% more than most others...

 

[copper]

I just bought product at Clickbank.com and Tax was added
I guess clickbank started collecting tax for NC.

 

[DNabc]

Godaddy products (except domain registrations and renewals) are still exempt?