North Carolina's Audit Practice Violates the First Amendment

Eversheds Sutherland (US) LLP
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On October 25, a U.S. District Court granted Amazon.com, LLC’s (Amazon) motion for summary judgment and held that the North Carolina Department of Revenue (Department) was not entitled to demand both product and customer information as part of its sales tax audit. Amazon successfully argued that the Department’s request for customer information violated the First Amendment. The court also held that the Tax Injunction Act did not bar a federal court from granting declaratory relief.

Summons for Customer and Purchase Information Violates First Amendment

As summarized in Sutherland’s June 28 Legal Alert, the Department demanded detailed information about Amazon’s customers, including customer names and addresses, as part of its audit of Amazon’s sales tax liability. While Amazon provided the Department with sales information, including the product sold and zip code information, it did not provide customer-identifying information. Amazon challenged the Department’s demand for customer information in the U.S. District Court for the Western District of Washington. The American Civil Liberties Union (ACLU) intervened on behalf of six anonymous persons (Intervenors) in support of Amazon.

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