January 22, 2014
Amazon will begin collecting sales tax in North Carolina next month
by Alex Shephard
Amazon, a company intent on making the plot of Minority Report a reality in our lifetime, will begin to collect sales tax in North Carolina on February 1st. of this year The move is somewhat surprising, considering that Amazon and North Carolina had previously butted heads repeatedly over sales tax since 2009, with Amazon handily winning every exchange.
According to Daily Tech, in 2009 “Amazon argued that it didn’t have to collect sales tax in the state because it didn’t have any physical facilities within its borders. In 2010, Amazon sued the North Carolina Department of Revenue to stop it from trying to obtain names and addresses of NC residents who made purchases from the e-tailer. Amazon won.” Considering this history, this announcement is being greeted in many corners as a surprise.
North Carolina’s sales tax is 4.75 percent, though the Charlotte Observer reports that local taxes “increase the rate to 6.75 percent to 7.5 percent, depending on the county.” The Observer also has a good overview of the problems North Carolina has faced in collecting sales tax:
Under the current system in North Carolina, taxpayers are supposed to pay a “use tax” on online purchases and declare them on their state tax returns. Few do. One 2010 estimate said failure to pay the taxes costs the state, its cities and counties $190 million a year.
The National Council of State Legislatures estimated that states lost $23.3 billion in 2012 from being prohibited from collecting sales tax from online and catalog purchases.
Interestingly, the American Civil Liberties Union once assisted Amazon in its battle to avoid collecting sales tax in North Carolina. After the state demanded that Amazon provide its Department of Revenue with a list of its customers so it could collect sales tax—since Amazon, of course, would not—Amazon complained that doing so “would harm customers who may have bought controversial merchandise and could diminish future sales” and the ACLU sued, arguing “that the request was illegal because it would have linked customers to items they purchased, revealing the names of books, DVDs and other products.”
Still, while the ACLU was probably ultimately right, Amazon—again, of course—had ulterior motives and used North Carolina’s attempt to collect sales tax from its customers as what our own Dennis Johnson referred to as an “expensive delaying tactic.” As the Seattle Times reported in 2011, North Carolina wasn’t interested in what customers bought—which is what the ACLU objected to, “just the names of customers and a general description of their purchases to determine the amount of sales taxes owed.” Nevertheless, the ploy was successful and North Carolina settled with the ACLU in 2011.
Twenty states now collect sales tax from Amazon sales. South Carolina will become the twenty-first in 2016.
Alex Shephard is the director of digital media for Melville House, and a former bookseller.