Texas & N.C. Going After Amazon

Two states' disputes with Amazon.com made the news this week.

On Saturday, the Dallas Morning News (DMN) reported here:

Texas has sent Amazon .com Inc. a $269 million bill for uncollected sales taxes on purchases made by state residents from the Seattle-based Internet superstore over a four-year period ...

The uncollected sales taxes are from December 2005 to December 2009 and include interest and penalties.

The DMN took credit for the investigation that led to this bill being sent to Amazon. The newspaper asked why Amazon wasn't collecting sales taxes in the state despite operating a distribution center in Irving, Texas. The Texas comptroller agreed and started an investigation into "Amazon's taxing status" in May of 2008.

Amazon's response is that "the assessment is without merit."

Bookstores have long claimed that Amazon has an unfair advantage when it comes to state sales taxes. Bookstores are forced to collect these taxes while Internet companies use strategies to avoid paying taxes.

BookWeb.org had an article about this subject in late December here:

In its Saturday, December 19, editorial, "The Web gets a pass: Online shoppers should pay the same sales tax, the Pittsburgh Post-Gazette noted, "While legislators tried to plug a deficit that came with the dour economy, $300 million in sales taxes on Internet purchases go uncollected annually," according to the state Department of Revenue" ....

"The Internet is everywhere -- that is the whole point. It is its own nexus. To heap absurdity upon absurdity, a retail Internet company can have warehouses in a state if it is owned by a subsidiary, which is what Amazon.com does in Pennsylvania."

And that is exactly Amazon's defense in the Texas case. According to the DMN:

Amazon contended the distribution center [in Irving, Texas] was owned by one of its subsidiaries called Amazon.com KYDC LLC, which is located at the same address as its corporate headquarters in Seattle.

The DMN indicates that Amazon has other distribution centers in the states of Arizona, Indiana, Nevada, Pennsylvania and Virginia. In these tough fiscal times, those states might also find it useful to send a tax bill to Amazon.

Yesterday Publishers Weekly reported here:

... Amazon won a round regarding North Carolina, where ... [a] federal judge ruled against North Carolina’s request for Amazon customer data, stating that the request is unconstitutional, violating First Amendment rights.

North Carolina has been trying to collect data on the customers who made purchases via Amazon in order that the state could begin to collect sales tax. U.S. District Judge Marsha J. Pechman in Seattle ruled that information already collected on customers in North Carolina should be destroyed.

Two weeks ago, the Seattle Times reported here:

Amazon has no offices or warehouses in North Carolina, so state lawmakers last year decided the company's relationships with local marketing affiliates amounted to a physical presence. Amazon responded by severing ties with its North Carolina affiliates, a move it also made in Rhode Island and Colorado.

Stay tuned to see how these two cases turn out ...