North Carolina wants Amazon to turn over a list of customer names and purchased items so that the state can slap them with a tax on internet purchases.  But this week, Amazon and the ACLU took the issue to court, arguing it is a clear violation of online customers’ First Amendment rights.

The release of these figures would allow the government to match customer names with potentially sensitive information including what kinds of books people are reading. Thankfully, Amazon is crying foul at the state’s First Amendment violation.

The affiliate nexus tax (aka the “Amazon Tax”) is an unconstitutional effort for states to collect taxes on internet transactions from out-of-state online retailers. The tax is a double whammy; while taking a shot at the Dormant Commerce Clause of the Constitution, the disclosure of such information infringes upon people’s First Amendment rights.

An attack of this nature on businesses and people’s rights is a state reflection of what is happening on the Federal level. Under the reign of Obama, our nation seems to have turned its back on American business. The current Administration demonizes and tries to squeeze money from taxpayers and industries to be funneled to an inefficient government. Statewide, the economic crisis has left many state governments looking for any way to plunder taxpayer’s wallets, and the behavior of the present Administration gives them the go-ahead. Amazon is standing up to such blatant abuse of American business and the American people.

Additional reasons why the affiliate nexus tax should be shot down in court:

  • Not only is a case like this unconstitutional due to the First Amendment, but also due to the 1992 Supreme Court Quill v. North Dakota case, that ruled a company must have a substantive physical nexus in order for the state to require that company to collect sales taxes, something out-of-state retailers do not have.
  • The tax imposes disparate burdens on online retailers by forcing internet-based businesses to track thousands of sales tax bases.
  • Instead of generating government revenue, we have seen the tax cut it. When Rhode Island, North Carolina, and a handful of other revenue-desperate states hopped on the bandwagon and instituted affiliate nexus taxes, what happened? Retailers immediately discontinued advertising programs in those states to avoid collecting the unconstitutional tax, resulting in a loss of income for advertising businesses in those states and obviously for the state governments. The Tax Foundation released a report, in which it found, “Amazon taxes are unlikely to produce revenue in the near term. New York continues to face a lengthy legal constitutional challenge. Rhode Island has even seen a drop in income tax collections due to the law.”

In the Washington Post today, Ken Langone, founder of Home Depot, restated his question to President Obama: “Why, during a time when investment and dynamism are so critical to our country, was it necessary to vilify the very people who deliver that growth?”

This question is applicable at a local level. The affiliate nexus tax will surely harm e-commerce through the obvious burden of taxation, but Amazon and North Carolina are in a battle over Constitutionality. Online retailers have a large stake in protecting their clients from the long arm of government.