ACLU, Amazon end fight with N. Carolina over privacy

The American Civil Liberties Union said Wednesday it has ended its dispute with the North Carolina Department of Revenue over the state's efforts to collect personal information about Amazon.com customers.

The ACLU, which joined a federal suit Amazon filed against North Carolina last year, said the state's tax collectors won't ask for information that could be used to tie people to the books, music and movies they buy online.

The agreement "will go a long way toward protecting the privacy and free-speech rights of online customers in North Carolina and hopefully elsewhere," ACLU attorney Aden Fine said in a statement.

Amazon got what it wanted in October when a federal judge in Seattle ruled that the First Amendment forbids the tax collectors from knowing the books, music and movies that customers buy from websites.

Rather than fight the decision, North Carolina agreed to change its data demands, and the case was closed in late January. Under the agreement, North Carolina must include a statement with any tax audit of an online seller of books, movies and other "expressive" materials that it does not want titles or other identifying information.

Amazon's legal dispute with North Carolina now is over, but the bigger battle over whether the Seattle-based retailer should begin collecting the state's sales tax is far from settled.

The case "has long been twisted into something it is not," North Carolina's Revenue Department said in a statement Wednesday.

"Bottom line, this is about fairly collecting the tax that is due to the state of North Carolina and nothing more."

Amazon filed suit in April seeking to prevent the state from getting the names and addresses of its North Carolina customers along with their previously disclosed purchases.

"Citizens are entitled to receive information and ideas through books, films and other expressive materials anonymously," U.S. District Judge Marsha Pechman said in her decision.

North Carolina said it never wanted to know the titles — just the names of customers and a general description of their purchases to determine the amount of sales taxes owed.

The state said it destroyed the detailed information "Amazon unnecessarily provided, and offered them the opportunity to comply with the state tax laws moving forward."

Online shoppers are supposed to pay sales taxes on purchases if they haven't already when they file their annual state returns, though few do.

Under a 1992 U.S. Supreme Court decision, a state cannot force Internet retailers to collect its sales tax unless they have a physical presence in that state. Amazon collects sales taxes in only a handful of states: Kansas, Kentucky, New York, North Dakota and Washington.

Recently, North Carolina passed a law saying Internet retailers must collect sales taxes based on their relationships with local affiliate websites that link to products sold on their sites. Amazon, which has no offices or warehouses in the state, then severed ties with its North Carolina marketing affiliates.

Revenue Department spokeswoman Beth Stevenson said the state's legal settlement "deals only with privacy issues raised in the lawsuit. It doesn't affect North Carolina's ability to investigate Amazon or any other Internet retailers for tax liabilities."

Stevenson said she did not know the legal basis North Carolina could use to pursue Amazon for uncollected sales taxes.

Likewise, an Amazon spokeswoman did not say if the company plans to turn over the names of its North Carolina customers now that detailed information about their online purchases has been destroyed.

Amy Martinez: 206-464-2923 or amartinez@seattletimes.com