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    Online Commerce, Taxation, the First Amendment and Privacy

    In many online transactions, the buyers aren’t charged state sales tax. In some states, “the burden is on shoppers to track what they buy online, calculate the sales tax owed and then pay it. In reality, few consumers fess up — many do not even know such a requirement exists,” the Washington Post reports. A 2009 report from the University of Tennessee estimated that, “the national state and local sales tax loss on these transactions is expected to grow from $8.6 billion in 2010 […] to $11.4 billion in 2012.”

    Now, the states are looking into how they can gather this tax revenue. “About a dozen, including Maryland and Virginia, this year have considered legislation that would force online retailers to collect the tax, though only a handful of bills have passed. Some states have even taken the unusual step of asking sites such as Amazon to provide lists of what residents have bought and how much they’ve spent, sparking concerns over consumer privacy,” the Post reports.

    There is federal privacy protection for some items sold by Amazon. The Video Privacy Protection Act of 1988 (18 U.S.C. § 2710) prevents the “wrongful disclosure of video tape rental or sale records” of “prerecorded video cassette tapes or similar audio visual materials,” which includes DVDs.

    One case raising privacy questions involves online retailer Amazon and North Carolina. Amazon filed a lawsuit (pdf) in a federal court in Seattle, saying North Carolina “is demanding that Amazon turn over the name and address of virtually every North Carolina resident who has purchased anything from Amazon since 2003, along with records of what each customer purchased and how much they paid. If Amazon is forced to comply with this demand, the disclosure will invade the privacy and violate the First Amendment rights of Amazon and its customers on a massive scale.”

    The New York Times reports that “Amazon’s lawyers say the Constitution protects the company so that it ‘may sell — and customers may read, hear or view — a broad range of popular and unpopular expressive materials with the customers’ private content choices protected from unnecessary government scrutiny.'” Examples of books and movies sold to customers in North Carolina include “Bipolar Disorder: A Guide for Patients and Families,” “Brokeback Mountain” and “Fahrenheit 9/11.”

    The Times says, “[I]magine what the government could do with ‘Converting to Islam for Dummies”‘or ‘Plant Your Own Marijuana Field.’ For this reason, privacy experts say, library records have been granted special protections and are generally not kept for long, lest they offer a tempting target for investigators.”

    The U.S. government has a troubled history concerning Americans’ reading habits. For example, in the 1980s, the FBI established the “Library Awareness Program,” a system to obtain library records to monitor reading habits. Later, it was revealed that the FBI had investigated hundreds of Americans – librarians and others – because they protested the program.

    This isn’t the first time that Amazon has fought a government demand for customer information. In 2006, federal prosecutors investigating a Madison, WI, official subpoenaed Amazon.com “for transaction records on anyone who had purchased books from him through Amazon Marketplace since 1999,” Natural News reported in 2008.

    In a November 2007 opinion (pdf) in the Wisconsin case, Magistrate Judge Stephen Crocker said:

    The subpoena is troubling because it permits the government to peek into the reading habits of specific individuals without their prior knowledge or permission. […] [I]t is an unsettling and un-American scenario to envision federal agents nosing through the reading lists of law-abiding citizens while hunting for evidence against somebody else. In this era of public apprehension about the scope of the USA PATRIOT Act, the FBI’s (now-retired) “Carnivore” Internet search program, and more recent highly-publicized admissions about political litmus tests at the Department of Justice, rational book buyers would have a non-speculative basis to fear that federal prosecutors and law enforcement agents have a secondary political agenda that could come into play when an opportunity presented itself. Undoubtedly a measurable percentage of people who draw such conclusions would abandon online book purchases in order to avoid the possibility of ending up on some sort of perceived “enemies list.”

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