reports that a federal judge has denied
the state of North Carolina's outrageous demand that Amazon.com turn over all its confidential customer records so that North Carolina can send sales tax bills to those customers. North Carolina wants Amazon to charge sales tax in the state simply because they have online affiliates in the state who get a small commission for linking books for sale to amazon.com. Amazon canceled the affiliate program for North Carolina, hurting many nonprofits and small businesses.
Amazon.com has no nexus in North Carolina -- it keeps no office of warehouse there. Under current federal case law, then it does not have to charge sales tax. But North Carolina is trying to use the affiliate argument to claim Amazon.com has a "substantial nexus" to the state. Other states have followed suit and are trying to force Amazon.com to charge sales tax. Texas just sent a huge tax bill to Amazon.com, which Amazon.com is refusing to pay.
As the recession drags on, cash-strapped states are looking anywhere they can to find revenue and out of state sales are a target, despite studies which show such laws don't provide additional revenues. As for sending sales tax bills to North Carolina residents years after they bought a book on Amazon.com, well, that's just ridiculous -- and at least one federal court agrees.