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Originally published April 20, 2010 at 5:46 PM | Page modified April 21, 2010 at 11:30 AM

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Amazon fighting attempt by N.C. to identify customers in the state

Amazon says the collection effort would have a chilling effect on people's willingness to buy controversial books, music and movies and should be declared unconstitutional. But officials for North Carolina's revenue department say they just want to know if customers are paying the state's sales tax.

Seattle Times business reporter

Amazon.com says it's standing up for free speech in North Carolina by fighting a state government attempt to identify customers and track their online purchases.

The Internet retailer says the state's Department of Revenue is demanding the name and address "of virtually every North Carolina resident who has purchased anything from Amazon since 2003, along with records of what each customer purchased and how much they paid."

Amazon was to have submitted the customer data Monday but instead filed a federal lawsuit in Seattle trying to block North Carolina's request.

Amazon says the collection effort would have a chilling effect on people's willingness to buy controversial books, music and movies, and should be declared unconstitutional.

But officials for North Carolina's revenue department say they just want to know if customers are paying the state's sales tax — not, as Amazon suggests, if they've bought "Lolita" on DVD or Eminem's latest release.

"We're not interested in the specific title or genre or any of that information," said Beth Stevenson, spokeswoman for the state's revenue department. "We're asking for what the purchase was in general and how much it cost."

North Carolina is one of several states that has stepped up its efforts in the current economic downturn to collect sales tax from online purchases.

Residents are required to pay sales tax on Amazon purchases if buying the same item in a store would be taxed. But North Carolina cannot force Amazon to collect its sales tax if it doesn't have a physical presence in the state. The Seattle-based retailer notes that it has no offices or warehouses in North Carolina.

State lawmakers last year tried to force Amazon to begin collecting sales tax based on its relationships with local marketing affiliates, saying they amounted to a physical presence. Amazon responded by severing ties to affiliates that linked to its products from their Web sites. The company also has stopped working with affiliates in Rhode Island and Colorado because of new tax collection-enforcement laws.

Amazon's complaint says tax authorities in North Carolina began auditing the company last year, and it provided "voluminous information" about sales to state residents, including the city, county and ZIP code to which an item was shipped, total transaction price and each item's product code.

The complaint says that to protect customer privacy, Amazon did not turn over names, addresses or other "personally identifiable" information. The problem, according to Amazon, is that North Carolina now is threatening a "contempt proceeding" if the company does not provide the information. It says federal action is necessary to avoid piecemeal litigation "in the event other states make similar demands for customer data."

Stevenson said Tuesday the state's lawyers were still reviewing the complaint and had not yet decided on a next course of action.

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The complaint says Amazon customers in North Carolina have bought more than 50 million books, music CDs, DVDs and other products from its website since 2003.

It goes on to list a handful of "potentially sensitive or personal books" that North Carolina residents have bought from Amazon, including titles on bipolar disorder, alcoholism, divorce and homosexuality.

"Each order of a book, movie, CD or other expressive work potentially reveals an intimate fact about an Amazon customer," the lawsuit says. "Public figures who have purchased expressive works and other items from Amazon have the additional concern that their purchase histories will be scrutinized and used for political purposes, appear in the press or otherwise be made public."

Even so, the lawsuit adds, North Carolina's revenue department "demands to know the identities and other personal information about Amazon's customers who have purchased or received these products."

Stevenson would not say if the revenue department wants the information to go after customers for back taxes, but she did point out that it has a duty to enforce state tax laws.

"It's a fairness issue for brick-and-mortar retailers that have to charge sales tax," she said.

Amy Martinez: 206-464-2923 or amartinez@seattletimes.com Seattle Times staff researcher David Turim contributed to this story.

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