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In a significant legal development, the South Carolina Court of Appeals has determined that Amazon Services LLC is accountable for the state’s sales tax on third-party sales made before the enactment of the 2019 marketplace facilitator law. The court’s decision, delivered in the case of Amazon Services LLC v. Department of Revenue on January 24^th, upheld a sales tax assessment against the company for third-party sales conducted through its online marketplace in the initial quarter of 2016.

Key Points from the Court’s Decision:

Tax Liability for Third-Party Sales:

The court affirmed that Amazon, for sales and use tax purposes, is engaged in selling tangible personal property at retail, making it liable for the state’s sales tax on third-party sales.

Retroactive Application and Due Process:

Amazon’s argument against the retroactive collection of taxes was rejected by the court. It concluded that the Department of Revenue (DOR) is not retroactively applying the marketplace facilitator law but is enforcing the sales tax law applicable at the time, which mandated physical presence.

DOR’s Statement:

In response to the ruling, the Department of Revenue expressed satisfaction, stating that the decision affirmed their position that Amazon must collect and remit sales tax on sales, aligning with other retailers in South Carolina.

Clarity in Sales Tax Statutes:

The court asserted that the sales tax statutes relevant to the case were unambiguous, leaving no substantial doubt that Amazon Services’ activities fell within the defined terms of seller, business, and sale.

Legislative Intent and Amendments:

While acknowledging subsequent amendments explicitly requiring marketplace facilitators to collect and remit sales tax, the court suggested that these changes could be seen as clarifications of the Legislature’s original intent. It highlighted language in the 2019 act, emphasizing that it should not be construed as a statement on ongoing litigations or audits related to the applicability of sales and use tax.

This verdict has implications not only for Amazon but also for the broader landscape of sales tax obligations in the state of South Carolina. The decision reinforces the evolving nature of tax regulations in response to the dynamic e-commerce environment.