Judge blocks effort to collect sales tax from customers

A federal judge has blocked North Carolina's attempt to force online retailer to turn over the names of its customers to state tax officials.

The U.S. District judge in Seattle, where's headquarters is based, said Monday that turning over customer names to government authorities violates a key First Amendment tenet.

"The First Amendment protects a buyer from having the expressive content of her purchase of books, music, and audiovisual materials disclosed to the government," Judge Marsha Pechman wrote. "The fear of government tracking and censoring one's reading, listening, and viewing choices chills the exercise of First Amendment rights."

The ruling is a victory for a half-dozen North Carolina residents who bought products from and asked the court in Seattle to protect their identities. The anonymous residents, four of whom live in the Triangle, said they bought materials about sex, alcoholism and other controversial subjects. They are represented by the American Civil Liberties Union.

N.C. Department of Revenue spokeswoman Beth Stevenson said state attorneys are reviewing the agency's options, including an appeal. The revenue department for more than a year has been seeking customer information from so that it could levy state sales tax on the retailer's customers.

Thwarted in its efforts, the state agency has threatened to tax at the highest possible rate, saying it would be up to the company to seek lower tax rates on a case-by-case basis for its online transactions.

The amount of sales tax revenue from sales is not known, but it is no doubt a considerable sum. has conducted nearly 50 million sales with North Carolina customers between Aug. 1, 2003 and Feb. 28, 2010, the court said. Presumably few, an any, of those sales resulted in sales taxes being paid by the buyers.

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