SC Supreme Court: Amazon Owes Sales Taxes on Third-Party Sales

The Globe and Atlas

Summary

SC Supreme Court rules Amazon must pay millions in sales taxes owed for third-party seller transactions.

Why this matters

This ruling clarifies tax liabilities for online platforms, potentially impacting similar sales tax disputes nationwide.

The South Carolina Supreme Court ruled Wednesday that Amazon must pay millions in uncollected sales taxes. In a 3-2 decision, the court concluded a long-standing dispute between Amazon and the South Carolina Department of Revenue over tax obligations for third-party sellers on Amazon’s platform.

The ruling specifically addresses $12.5 million owed for early 2016, following the end of a sales tax exemption. However, the decision may result in Amazon owing more than $277 million related to other cases, as previously indicated by the state’s department.

Amazon argued it was a marketplace provider rather than the seller, suggesting independent sellers were responsible for tax collection. However, the Administrative Law Court, the Court of Appeals, and finally the state Supreme Court found that Amazon’s control over transactions made it liable for tax collection.

Justice John Few, joined by Justices Gary Hill and George James, wrote that Amazon’s control over third-party transactions equated to selling, thus requiring tax collection. Chief Justice John Kittredge, dissenting, argued that state law’s ambiguity should favor the taxpayer.

Despite Amazon disputing the legal interpretation, it paid the initial $12.5 million, as required to contest the case further. However, the company delayed taxing third-party sales until April 30, 2019. State audits indicate Amazon owes $277.2 million in taxes and interest since April 1, 2016.

Revenue Director Hartley Powell expressed satisfaction with the court’s alignment with his department’s stance. “The Supreme Court rightly rejected Amazon’s contention it was not engaged in the business of selling,” Powell stated.

Prior to a 2018 U.S. Supreme Court ruling, companies needed a physical presence in a state to mandate tax collection. Amazon, having received a five-year tax exemption from South Carolina in 2010 for job creation, began operations exempt from such taxes.

Following the exemption’s expiration, Amazon collected sales taxes only on direct sales, opting to send third-party seller taxes collected to the seller. Many sellers did not remit these taxes.

Amazon’s disputes over subsequent bills have been on hold pending this ruling.

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    The South Carolina Supreme Court ruled Wednesday that Amazon must pay millions in uncollected sales taxes. In a 3-2 decision, the court concluded a long-standing dispute between Amazon and the South Carolina Department of Revenue over tax obligations for third-party sellers on Amazon’s platform. The ruling specifically addresses $12.5 million owed for early 2016, following the end of a sales tax exemption. However, the decision may result in Amazon owing more than $277 million related to other cases, as previously indicated by the state’s department. Amazon argued it was a marketplace provider rather than the seller, suggesting independent sellers were responsible for tax collection. However, the Administrative Law Court, the Court of Appeals, and finally the state Supreme Court found that Amazon’s control over transactions made it liable for tax collection. Justice John Few, joined by Justices Gary Hill and George James, wrote that Amazon’s control over third-party transactions equated to selling, thus requiring tax collection. Chief Justice John Kittredge, dissenting, argued that state law’s ambiguity should favor the taxpayer. Despite Amazon disputing the legal interpretation, it paid the initial $12.5 million, as required to contest the case further. However, the company delayed taxing third-party sales until April 30, 2019. State audits indicate Amazon owes $277.2 million in taxes and interest since April 1, 2016. Revenue Director Hartley Powell expressed satisfaction with the court’s alignment with his department’s stance. “The Supreme Court rightly rejected Amazon’s contention it was not engaged in the business of selling,” Powell stated. Prior to a 2018 U.S. Supreme Court ruling, companies needed a physical presence in a state to mandate tax collection. Amazon, having received a five-year tax exemption from South Carolina in 2010 for job creation, began operations exempt from such taxes. Following the exemption’s expiration, Amazon collected sales taxes only on direct sales, opting to send third-party seller taxes collected to the seller. Many sellers did not remit these taxes. Amazon’s disputes over subsequent bills have been on hold pending this ruling.
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