In a dispute arisen from a “routine sales and use tax audit of Amazon by North Carolina‘s tax agency,” Amazon filed a lawsuit Monday in an attempt to resist demands from the state for detailed records of sales made to people in the state, according to a CNet News wire story by Declan McCullagh.

According to the report,

Because Amazon has no offices or warehouses in North Carolina, it’s not required to collect the customary 5.75 percent sales tax on shipments, although tax collectors have reminded residents that what’s known as a use tax applies on anything “purchased or received” through the mail. The dispute arose out of what had otherwise been a routine sales and use tax audit of Amazon by North Carolina’s tax agency ….

Amazon did provide the state tax collectors with anonymized information about which items were shipped to which zip codes. But North Carolina threatened to sue if the retailer did not also divulge the names and addresses linked to each order–in other words, personally identifiable information that could be used to collect additional use taxes that might be owed by state residents.

McCullagh reports that “North Carolina’s Department of Revenue had ordered the online retailer to provide full details on nearly 50 million purchases made by state residents between 2003 and 2010.” Amazon counters that “the demand violates the privacy and First Amendment rights of Amazon’s customers.”

In a thoughtful commentary for the Los Angeles Times, Jon Healy sets the context, noting that “The IRS estimates that individuals and businesses dodge nearly $300 billion in federal tax bills annually — more than twice the amount needed to pay for the new health insurance subsidies. States fail to collect more than $20 billion annually just in sales taxes. Every dollar owed but not collected winds up being taken from someone who is complying.”

“With that in mind, I found myself actually rooting for North Carolina,” says Healy, even though its “records request probably violates the federal law protecting the confidentiality of video purchases, as well as the 1st Amendment’s protections for speech …”

Still, he notes, “North Carolina’s invasive demand for documents is aimed simply at making people pay what they owe” — and “Amazon has been, umm, less than helpful to the states on this point.”

As he reminds us,

In a pair of rulings that predated the Web, the Supreme Court held that mail-order merchants aren’t compelled to collect taxes in states where they did not have a physical presence. These rulings have led Amazon, like many other online merchants, to offer tax-free shopping to customers in most states — a distinct competitive advantage over the local stores who have no choice but to collect the taxes. And when lawmakers in North Carolina and a handful of other states declared that online merchants established a local presence merely by paying commissions to websites located within the state’s borders, Amazon terminated its affiliate sales program in those states.

So what’s the solution?

The right approach is for Congress to let states require online merchants to collect sales taxes, possibly through a uniform mechanism such as the Streamlined Sales Tax that 44 states are developing. The idea has bipartisan support on Capitol Hill, but not enough to become law — at least not yet. That’s probably because it looks like a tax increase, even though it isn’t. It’s an attempt to get people to pay what the law obligates them to pay. What’s wrong with that?