For over a decade the North Carolina Department of Revenue (DOR) has pressured online retailers to collect and remit state sales tax. Retailers, such as Amazon, that do not maintain a physical presence in the state have contended that they are protected by a 1992 Supreme Court case. This case mandates that before a company is required to collect state sales tax it must have a “nexus” in the state. Nexus means some ascertainable, physical presence in North Carolina.

A review of those companies not collecting sales tax would reveal that they have no stores, warehouses or related vendors in the state, nor have they voluntarily agreed to follow the DOR’s demands that they voluntarily collect sales tax. Any N.C. consumer who has engaged in online shopping is likely to have witnessed this sales tax struggle when at “checkout” certain companies did not assess sales tax while others did. For the DOR, this is not a small matter as lost online sales tax revenues have been approximated at $185 million for the 2010 tax year. What remains is to understand the more recent litigation initiated by the DOR challenging Amazon in an effort to find a weakness in the federal law that has provided online retailers with a sales tax umbrella for almost 20 years.

In early 2010, the DOR filed a lawsuit in the state of Washington against Amazon. The suit sought to force the company to disclose the names and addresses of all N.C. purchasers that had received items from Amazon during the period 2003-08. Further, the complaint demanded that the company provide a list of all purchased items along with prices. Needless to say, Amazon responded with a vigorous defense that was supported by a large number of other nonresident retailers.

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