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N.C. defends request for Amazon customer records

State tax agency says it never asked for book titles, but CNET has reviewed letters from Department of Revenue that demanded "all information" about nearly 50 million purchases.

Declan McCullagh Former Senior Writer
Declan McCullagh is the chief political correspondent for CNET. You can e-mail him or follow him on Twitter as declanm. Declan previously was a reporter for Time and the Washington bureau chief for Wired and wrote the Taking Liberties section and Other People's Money column for CBS News' Web site.
Declan McCullagh
3 min read

North Carolina's tax collectors said Wednesday that they never demanded personal information such as book titles from Amazon.com, which filed a federal lawsuit against the state this week seeking to keep that information confidential.

"Amazon's complaint is misleading in alleging the department has required detailed information revealing personal consumer preferences, such as book titles," North Carolina Secretary of Revenue, Kenneth Lay, said in a statement.

But CNET has obtained correspondence from the Department of Revenue that calls North Carolina's claim into question.

In a letter to Amazon dated December 1, 2009, Romey McCoy, the state Department of Revenue's audit manager, asked for "all information" relating to nearly 50 million purchases that customers in that state had made between 2003 and 2010. McCoy's letter did not exempt the titles of books or Blu-ray movies and did not address the privacy implications of the request.

Amazon subsequently turned over limited, anonymous information: the amount of the purchase, the seller, and the postal code it was sent to.

McCoy replied in a second letter on March 19, 2010, saying Amazon had until this Monday to divulge the full records of each transaction or North Carolina "will" take legal action. To punctuate his threat of litigation, McCoy's letter copied two assistant attorneys general in the North Carolina Department of Justice.

The second letter reiterated the request for "all information" on each purchase, and said Amazon "omitted" the billing name and address, the shipping name and address, and the "product/item code or description." It also asked for a "detail[ed] description" of each item shipped and "any other" information about the transaction.

Because Amazon has no offices or warehouses in North Carolina, it's not required to collect the state's 5.75 percent sales tax on shipments, although tax collectors have reminded residents that what's known as a use tax applies on anything "purchased or received" through the mail.

Lay, the state tax collector, said Wednesday that his agents routinely request information including the purchaser's name, address and the item's purchase price but that information such as book titles "is not required to calculate the tax due, and the department has not requested this information."

Amazon replied in a statement saying: "It's encouraging that the North Carolina Department of Revenue now agrees that it doesn't need the customer information it has demanded in order to complete its audit of Amazon... We are hopeful that the Department of Revenue's statement today will enable us to continue cooperating with the department's audit in a way that does not compromise the privacy and First Amendment rights of our customers."

When asked whether the state Department of Justice provided legal advice about asking for Amazon customer records, department spokeswoman Noelle Talley said she would not comment on pending litigation. A representative of the Department of Revenue did not immediately respond to questions from CNET on Wednesday.

In general, purchases of books, DVDs, Blu-ray discs, and other media enjoy special privacy protections. In a 2002 decision, the Colorado Supreme Court ruled that the First Amendment protects an "individual's fundamental right to purchase books anonymously, free from governmental interference." The Colorado justices tossed out a subpoena from police to the Tattered Cover Bookstore asking for information about what books a certain customer had purchased.

North Carolina's aggressive push for customer records comes as other states are experimenting with new ways to collect taxes from online retailers. California may require retailers to report the total dollar value of purchases made by each state resident, which CNET reported last month, and Colorado already has enacted such a law. A decision is expected at any time in a related case that Amazon filed against New York state.

Update late Wednesday: Beth Stevenson, the North Carolina Department of Revenue's director of public affairs, sent me this statement: "As mentioned in our previous statement, the Department of Revenue has not requested information regarding specific titles of books or CDs. The request for 'product/item code or description' simply requested the type of product purchased, for example, 'book.' Information regarding the type of product is necessary to determine the correct rate of tax."

However, both letters from the department had asked for "all information" for each of the 50 million orders.