NC tax man drops bid to see Amazon buyers' data

RALEIGH, N.C. (AP) - North Carolina tax collectors have ended a court fight with Amazon.com Inc. and its customers after clarifying that demands for purchasers' data don't include the titles of the books and other products.

The lawsuit originally filed by Amazon in its hometown of Seattle was closed late last month after a settlement between North Carolina's Revenue Department and seven North Carolina residents represented by the American Civil Liberties Union.

The Revenue Department's future requests for data from Internet retailers will clarify that tax collectors don't want the titles or other identifying information of the books, movies or music sold, according to a copy of the settlement the agency provided Wednesday.

The state tax agency also agreed to pay $99,000 in attorneys fees to settle the dispute, but reserved the right to pursue tax collections against Amazon or its customers.

"We are pleased that the public's First Amendment rights have been upheld by this settlement, which prohibits the department from seeking this kind of information from Amazon or other Internet retailers in the future," ACLU of North Carolina executive director Jennifer Rudinger said in a statement.

Amazon filed its lawsuit, later joined by the North Carolina customers, last April as tax collectors audited whether Amazon was properly collecting sales taxes owed on online purchases. Lawyers for the tax agency said either Amazon or its customers owe North Carolina $50 million in sales and use taxes on Internet purchases over several years before a state law was changed in 2009.

Amazon said complying with the department's information requests would harm customers who may have bought controversial merchandise and could diminish future sales. A federal judge in Seattle ruled in October that Amazon customers had constitutional free-speech protection against tax collectors knowing which books, music and movies individual customers bought.

"This settlement only makes our position more clear to Amazon and other retailers that the department has no interest in the titles of books, movies, music or other expressive items," the agency said in a statement. "The lawsuit on this particular issue could have been avoided altogether if not for the aggressive stance Amazon took to avoid compliance with North Carolina's tax laws. There would have never been an issue of customer privacy if Amazon would simply collect the North Carolina sales tax that others already do."

An Amazon spokeswoman declined comment.

North Carolina requires residents to pay taxes on online purchases if buying the same item in a physical store would result in a sales tax. But out-of-state retailers can't be forced to collect North Carolina's tax if they have no physical presence in the state.

Amazon disputes it has a North Carolina presence, but a 2009 state law made Amazon responsible for collecting sales taxes because it had a network of local affiliates. The affiliates were North Carolina residents who maintained blogs or other online sites and provided links to products, promoted Web shopping deals and offered coupons.

Before the change was adopted, Amazon cut its ties to those North Carolina affiliates. The company also stopped working with affiliates in Rhode Island and Colorado because of collection-enforcement laws passed in those states.

North Carolina's tax agency decided to pursue Amazon for taxes it argues should have been collected during the years those affiliates were operating.