Amazon.com LLC v. Lay

Filing 45

DECLARATION of Galbreath filed by Plaintiff Amazon.com LLC re 44 MOTION for Summary Judgment (Caplow, Steven)

Amazon.com LLC v. Lay

Doc. 45

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 AMAZON.COM LLC

THE HONORABLE MARSHA J. PECHMAN

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE ) ) Plaintiff, ) ) v. ) ) KENNETH R. LAY, in his official capacity as ) Secretary of the North Carolina Department of ) Revenue, ) ) ) Defendant. ) No. 10-CV-00664 DECLARATION OF JENNIFER GALBREATH IN SUPPORT OF PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT PURSUANT TO FED. R. CIV. P. 56(a) NOTE ON MOTION CALENDAR: August 6, 2010

I, Jennifer Galbreath, declare under the penalty of perjury as follows: 1. I am Senior Tax Manager, Indirect Taxes, for Amazon.com, Inc., parent

company of Amazon.com LLC ("Amazon"). In this position, I am responsible for Amazon's compliance with the requests issued by the North Carolina Department of Revenue ("DOR") to Amazon in this case, described below. I have personal knowledge of the matters referred to in this declaration, either directly or based on due diligence and reasonable inquiry, including my review of Amazon's business records. If called as a witness, I am competent to testify to those matters. 2. I submit this declaration in support of Amazon's Motion for Summary

Judgment and points and authorities in support thereof. 27
DECLARATION OF JENNIFER GALBREATH-- 1
Davis Wright Tremaine LLP
LAW OFFICES Suite 2200 1201 Third Avenue [phone]
Seattle, Washington 98101- 30 45 Fax: [phone]

Dockets.Justia.com

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3.

Between August 1, 2003, and February 28, 2010, customers in North Carolina

purchased nearly 50 million products from Amazon's website. The majority of these 50 million products were expressive works such as books, music CDs and DVDs. 4. On December 1, 2009, as part of an audit of Amazon for compliance with state

sales and use tax laws, the DOR sent an Information Document Request (the "December Information Request") to Amazon at its principal place of business in Seattle, Washington. A true and correct copy of the December Information Request is attached hereto as Exhibit A.

8 9 10 11 12 13 14 15 "may prompt the state to issue a summons in accordance with North Carolina General Statute 16 17 18 19 20 21 22 23 24 25 26 27
DECLARATION OF JENNIFER GALBREATH-- 2
Davis Wright Tremaine LLP
LAW OFFICES Suite 2200 1201 Third Avenue [phone]
Seattle, Washington 98101- 30 45 Fax: [phone]

5.

Question 16 of the December Information Request asked, in part, that Amazon

provide "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 (emphasis added). 6. The cover letter sent by the DOR with the December Information Request

stated that Amazon's failure to disclose the requested information within the requested time

§ 105-258." Ex. A, cover letter, p. 1. The instructions to the December Information Request also warned Amazon that "[i]f the information is not provided by the due date, the Secretary may issue a summons pursuant to N.C. Gen. Stat. 105-258." Ex. A, "Information Data Request" at 1. 7. In response, Amazon employees in Seattle provided the DOR with detailed

information about millions of purchases made by North Carolina customers during the relevant time period. Specifically, Amazon provided the DOR with responses to all of the data fields specified by the DOR that were reasonably obtainable from Amazon's records,

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including: order ID number, seller, ship-to city, county, postal code, the non-taxable amount of the purchase, and tax audit record identification (the "Initial Data"). 8. Included in the Initial Data was the specific product code for each item

purchased, which is known as the Amazon Standard Identification Number, or ASIN. Amazon uses ASIN numbers to identify products in its catalog and its systems. Sales information for each product is stored by ASIN number as well. As a general matter, Amazon does not maintain sales records for specific items in its systems by more generic product

8 9 10 11 12 13 14 15 10. 16 17 18 19 20 21 22 23 24 25 26 27
DECLARATION OF JENNIFER GALBREATH-- 3
Davis Wright Tremaine LLP
LAW OFFICES Suite 2200 1201 Third Avenue [phone]
Seattle, Washington 98101- 30 45 Fax: [phone]

codes. If the DOR searches for any ASIN number on the Amazon website, the website will display details about the item, and the DOR can learn the title and description of each book, DVD, music selection, or other item purchased by the customer. 9. To protect customer privacy, including customer choices of expressive

material, Amazon did not provide the DOR with the name, address, phone number, e-mail address or other personally identifiable information of any customer. From March 15 to March 17, 2010, and resuming on March 19, 2010, DOR

agents Romey McCoy and Jerri Noland visited Amazon's Seattle offices and met with Amazon employees in furtherance of the DOR's efforts to obtain information from Amazon regarding Amazon's sales to North Carolina residents. Amazon employees provided these DOR agents with responsive data both on data CD and via e-mail. 11. By letter hand-delivered on March 19, 2010, to Amazon in Seattle,

Washington (the "March Information Request"), the DOR stated that Amazon's initial response to Question 16 of the December Information Request omitted the "Bill to Name; Bill to Address (Street, City, State, and Zip); Ship to Name; Ship to Address (Street)" as well as "Product/item code or description" (the "Customer Data"). The DOR demanded that Amazon

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provide the Customer Data "for examination" on or before April 19, 2010, or face an administrative summons pursuant to N.C. Gen. Stat. § 105-258. A true and correct copy of the March Information Request is attached hereto as Exhibit B. 12. In response, Amazon, by its Vice President, Tax and Tax Policy Robert D.

Comfort, sent a letter to Defendant Kenneth R. Lay at the DOR on April 19, 2010, declining to produce the Customer Data or any other personally identifiable information about Amazon's customers. A true and correct copy of the letter from Mr. Comfort to the

8 9 10 11 12 13 14 15 viewing, listening and other personal choices to unnecessary government scrutiny. 16 17 18 19 20 21 22 23 24 25 26 27
DECLARATION OF JENNIFER GALBREATH-- 4
Davis Wright Tremaine LLP
LAW OFFICES Suite 2200 1201 Third Avenue [phone]
Seattle, Washington 98101- 30 45 Fax: [phone]

Defendant is attached hereto as Exhibit C. 13. Amazon already furnished the Initial Data, including the ASIN number, for all

purchases responsive to the December Information Request for "all information for all sales." The disclosure of the Customer Data would reveal to the DOR the identities of customers who have purchased books, movies, music and other items, and would link those purchases directly to the customers' names and addresses, exposing their otherwise private reading,

14.

Faced with the choice between complying with the March Information Request

and violating the privacy and First Amendment rights of Amazon and its North Carolina customers, or risking an administrative summons by refusing to comply with the DOR's request Amazon sought to protect its rights and the rights of its customers by filing its Complaint in this Court on April 19, 2010. 15. In a press release issued immediately following Amazon's filing of this

lawsuit, Secretary Kenneth Lay of the DOR stated that the DOR took the position that information regarding specific titles purchased by Amazon's customers is information that "is

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not required to calculate the tax due." A true and correct copy of the press release is attached hereto as Exhibit D. 16. The DOR responded to Amazon's April 19, 2010 letter and to Amazon's filing

of this lawsuit in a letter dated April 21, 2010. A true and correct copy of this letter is attached as Exhibit E. In its April 21 letter, the DOR declared that it "is not seeking information regarding the titles of books and CDs purchased by North Carolina customers" and admitted that "[t]his information is not required in order for the Department to calculate

8 9 10 11 12 13 14 15 DOR were to return a disk containing the Initial Data, what assurances could be provided that 16 17 18 19 20 21 22 23 24 25 26 27
DECLARATION OF JENNIFER GALBREATH-- 5
Davis Wright Tremaine LLP
LAW OFFICES Suite 2200 1201 Third Avenue [phone]
Seattle, Washington 98101- 30 45 Fax: [phone]

the amount of sales or use tax properly due the State." DOR offered to return the ASIN information but expected to receive the "information you have not provided without further delay." 17. As described in the accompanying Declaration of David A. Zapolsky

("Zapolsky Decl."), para. 19, Amazon's counsel sent a letter to the DOR on May 14, 2010 (the "May 14 Letter," attached to the Zapolsky Decl. as Ex. 1) asking the DOR: (a) if the

the DOR had not made any back-ups of this data; (b) whether the DOR would enter into a consent order prohibiting the DOR from seeking the titles of expressive material from Amazon in the future; and (c) whether and why the DOR needs the Customer Data, or any other personally identifiable information, in order to audit Amazon. The May 14 Letter also requested that the DOR issue a revised request for information that would state specifically that Amazon need not provide the names and titles of books, movies, CDs and other expressive materials. 18. The DOR responded to Amazon's May 14 Letter with a letter dated May 19,

2010, attached to the Zapolsky Decl. as Ex. 2, which indicated that the DOR would be

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seeking additional information but did not respond to the substance of Amazon's May 14 Letter. 19. On June 4, 2010, the DOR issued a new Information Document Request (the

"June Information Request") to Amazon demanding additional information from Amazon. A true and correct copy of the June Information Request is attached hereto as Exhibit F. 20. The June Information Request does not specifically state that Amazon need not

provide the names and titles of books, movies, CDs and other expressive materials it 8 9 10 11 12 13 14 15 subsidiaries." The same letter further declares that "[t]he Department reserves the right to 16 17 18 19 20 21 22 23 24 25 26 27
DECLARATION OF JENNIFER GALBREATH-- 6
Davis Wright Tremaine LLP
LAW OFFICES Suite 2200 1201 Third Avenue [phone]
Seattle, Washington 98101- 30 45 Fax: [phone]

demanded in its December Information Request. Nor does it mention the "Bill to Name; Bill to Address (Street, City, State, and Zip); Ship to Name; Ship to Address (Street); Product/item code or description" that DOR demanded in the March Information Request. 21. Instead, the cover letter accompanying the June Information Request states that

the DOR "seeks additional information, as well as information previously requested and not provided, about the business operations and tax reporting of Amazon.com, Inc. and its

request additional information including, but not limited to, information not provided in response to earlier IDR requests." 22. The text of the June Information Request likewise demands generally "[a]ll

books, records papers and other documents in your possession or control concerning the Sales and Use Tax liability of Amazon.com, Inc. and Subsidiaries ("you" and "your"), for the audit period August 1, 2003 through June 30, 2009 ("Audit Period") unless a different period is indicated, including but not limited to" a list of 34 new detailed questions, many with subparts. Like the prior December Information Request and the March Information Request, the June Information Request reminds Amazon that if it does not provide the requested

EXHIBIT A

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EXHIBIT B

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EXHIBIT D

North Carolina Department of Revenue
Beverly Eaves Perdue Governor
Release: Immediate Contact: Beth Stevenson [phone] Director of Public Affairs

Kenneth R. Lay Secretary
April 21, 2010

DOR Responds to Amazon Complaint
Amazon.com, LLC, has filed a complaint against the North Carolina Secretary of Revenue, Kenneth R. Lay, in Washington State federal court seeking to prevent the Secretary from obtaining information needed to fairly and equitably administer the State's tax laws. The collection and remission of sales tax by Internet retailers such as Amazon falls within the Department of Revenue's responsibility to impartially and efficiently administer tax laws and collect all taxes due the State of North Carolina. In some instances, remote sellers are obligated to collect North Carolina sales tax in conjunction with transactions with individuals. The Department routinely requests third party, or consumer information, in order to identify and collect any taxes due the state. It requests general information about a transaction including the purchaser's name, address and the item's purchase price in order to properly administer the collection of taxes. Amazon's complaint is misleading in alleging the Department has required detailed information revealing personal consumer preferences, such as book titles. This information is not required to calculate the tax due, and the Department has not requested this information. "We have requested the same information from other businesses who have complied with their obligation to provide information to the Department," Secretary Lay said. "This is really an issue of fairness and equity for small businesses, the brick and mortar, corner-store operations. These businesses are at a competitive disadvantage when they have to collect sales taxes that other businesses do not. The Department is committed to supporting North Carolina small business and facilitating the equitable collection of taxes from both individual and corporate taxpayers." ####
PO Box 25000, Raleigh, NC 27640 State Courier 51-71-00
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