Amazon.com, LLC, Plaintiff v. Kenneth R. Lay

Amazon.com, LLC, Plaintiff v. Kenneth R. Lay in his official capacity as Secretary of the North Carolina Department of Revenue, Defendant.

Jane Does 1-6, and Cecil Bothwell, Plaintiffs–Intervenors, v. Kenneth R. Lay, in his official capacity as Secretary of the North Carolina Department of Revenue, and Amazon.com, LLC, Defendants in Intervention.

758 F.Supp.2d 1154. Case No. C10–664 MJP. United States District Court, W.D. Washington,at Seattle, Oct. 25, 2010.

Case Details

Amazon.com LLC, Plaintiff, moves for summary judgment in the North Carolina tax lawsuit regarding Defendant Kenneth R. Lay. Amazon.com LLC and the North Carolina Department of Revenue (“DOR”) have long disputed whether Amazon must collect and remit North Carolina sales and use taxes. Amazon has conducted nearly 50 million transactions with North Carolina residents from August 1, 2003 to February 28, 2010, apparently without collecting or remitting North Carolina sales and use taxes. Amazon and the DOR are presently locked in a dispute that implicates the First Amendment rights of Amazon’s customers.

As part of an audit of Amazon, the DOR, whose secretary is Defendant Lay, sent a request on December 1, 2009 to Amazon seeking “ ‘all information for all sales to customers with a North Carolina shipping address by month in an electronic format for all dates between August 1, 2003, and February 28, 2010.’ ” The request was made as part of DOR’s investigation of Amazon’s tax liability, not its customers’ tax liability.

In response, Amazon provided the DOR with “detailed information about millions of purchases made by North Carolina customers during the relevant time period.” Amazon provided the order ID number, seller, ship-to city, county, postal code, the non-taxable amount of the purchase, and the tax audit record identification. In addition, Amazon provided the Amazon Specific Identification Number (“ASIN”) for every purchase, a number which permits access to the specific and detailed description of the product. Amazon identifies products in its catalog and maintains its sales records using ASIN numbers, rather than more generic product codes. Collectively, this information permits the DOR to learn of the “title and description of every book, DVD, music selection, or other item purchased by the customer.” Amazon did not include the name, address, phone number, e-mail address or other personally identifiable information of any customer.

On March 19, 2010, the DOR requested Amazon provide the “Bill to Name; Bill to Address (Street, City, State, and Zip); Ship to Name; Ship to Address (Street); and Product/item code or description.” The DOR reiterated its request for “all information for all sales to customers with a North Carolina shipping address.” The DOR threatened that it would file a summons if Amazon did not comply. In response, on April 19, 2009, Amazon filed a complaint in this Court and sent a letter to DOR explaining that it wished not to violate its customer’s privacy rights by disclosing any personal identifiers. Amazon maintains that if the DOR obtains the information it seeks, it will possess all information necessary to know the expressive content of all purchases from Amazon by individual North Carolina residents.

After Amazon filed its complaint, the DOR sent a letter explaining that it “is not seeking information regarding the titles of books and CDs purchased by North Carolina customers.” The DOR explained that the information “is not required in order for the Department to calculate the amount of sales or use tax properly due the State.” The DOR stated that it only requested “the name and bill to and ship to address for all sales to customers with a North Carolina shipping address” and “a general product code or description, for example, ‘book.’ ” Amazon contends that it only keeps product information in ASIN format. However, beginning in June 2008, Amazon developed a five-digit product tax code that includes a more generic product description, such as “general books,” digital books, “candy,” or “general food.” The DOR obtained information in this format from Amazon that was responsive to its requests.

On June 4, 2010, the DOR sent a third document request to Amazon. The request sought “additional information, as well as information previously requested and not provided about the business operations and tax reporting of Amazon.com.” DOR offered to return the initial data Amazon sent, including the ASIN, in exchange for more general product coder information. However, the DOR maintains that it “cannot simply return the disks provided because they contain significant additional information that the Department requires in order to determine Amazon’s and its customers’ North Carolina sales and use tax liability.” The DOR now states that it has removed the data Amazon gave it from its computers, but that the CDs with the information are now stored in the Secretary Lay’s desk.

Plaintiff’s Argument

Amazon pursues two main claims:

  • The First Amendment and Article 1, Sections 4 and 5 of the Washington State Constitution bar the revelation of the identities of its customers’ purchases and any specifics as to the content of the purchases
  • The Video Privacy Protection Act bars compliance with the DOR’s March 2010 request. Amazon seeks a declaration “that, to the extent the March Information Request demands that Amazon disclose its customers’ names, addresses or any other personal information, it violates the First Amendment and 18 U.S.C. § 2710.”

Amazon also asks for the same declaration with respect to the Washington State Constitution.

Defendant’s Argument

  • DOR seeks dismissal on the theory that Amazon has suffered no harm and their claims are not ripe.
  • The DOR argues that Amazon’s complaint violates the Tax Injunction Act and that the Court lacks jurisdiction.
  • This argument is not correct.

Summary and Conclusion

Amazon has shown a right to obtain declaratory relief given that the DOR’s information requests run afoul of the First Amendment and the VPPA. The Court therefore declares: to the extent the March Information Request demands that Amazon disclose its customers’ names, addresses or any other personal information, it violates the First Amendment and 18 U.S.C. § 2710, only as long as the DOR continues to have access to or possession of detailed purchase records obtained from Amazon (including ASIN numbers). The Court grants Plaintiff’s motion for summary judgment and denies Defendant’s motions to dismiss.