Amazon Sues the North Carolina Department of Revenue
First a disclaimer: I am not a lawyer. This blog entry is opinion. Do not use this blog entry to base any legal proceedings. With that disclaimer, I will show why I think the North Carolina Department of Revenue (DOR) is out of line and, in fact, violating the US Constitution.
The DOR wants Amazon to provide all purchase information, including names and addresses, of people who purchased anything from amazon.com in the state of North Carolina and up to 7 years back. The ultimate goal of this is to levy a "use tax" or collect back sales tax. Amazon thinks that such request is a violation of the First Amendment. That may be, but the request also violates the US Constitution Article I, Section 8, Clause 3, commonly called the Commerce Clause or Interstate Commerce Clause.
The Supreme Court agrees. In a 1992 decision Quill Corporation v. North Dakota the Supreme Court rules as follows:
As in a number of
other cases involving the application of state taxing statutes to out of
state sellers, our holding in Bellas Hess relied on both the
Due Process Clause and the Commerce Clause. Although the "two claims are
closely related," Bellas Hess, 386 U. S., at 756, the clauses pose
distinct limits on the taxing powers of the States. Accordingly, while a
State may, consistent with the Due Process Clause, have the authority
to tax a particular taxpayer, imposition of the tax may nonetheless
violate the Commerce Clause.
...
Indeed, even if we were
convinced that Bellas Hess was inconsistent with our Commerce
Clause jurisprudence, "this very fact [might] giv[e us] pause and
counse[l] withholding our hand, at least for now. Congress has the power
to protect interstate commerce from intolerable or even undesirable
burdens.
In essence, what the Supreme Court was saying is the entire ruling unless the company had a "nexus" in a state, that company was under no obligation to collect sales tax or use tax. A nexus in this ruling is defined as some sort of physical presence in that state. This makes sense. After all, North Carolina law does not apply when you are in Florida. Therefore, if a company is in Florida, that company must follow federal laws and Florida laws.
Now unfortunately, there is some confusion because some other rulings mentioned use taxes. These were not rulings on such things, but the ruling mentions the use tax as being acceptable. Another Supreme Court ruling will likely be required to sort this out completely. New York state is forcing interent companies to charge sales tax and it is somehow allowed.
The state of North Carolina claims this is about being fair. What it really is about is trying to collect more tax in any way possible. The issue may eventually go to the Supreme Court. Right now, it is federal court in Seattle. If the federal court or Supreme Court agree with North Carolina, you can bet every state that charges sales tax will follow North Carolina. There is a lot on the line.
Posted by Wade Burchette at 1:00 PM - Categories: General | News | Privacy