Amazon Marketplace Sales Crippling South Carolina Tax Base: Brief

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By Andrew M. Ballard

The South Carolina Department of Revenue says the state faces “irreparable harm” if a court doesn’t force an Amazon subsidiary to collect and remit tax on third-party marketplace sales while the parties battle over the issue.

“Never before has a single retailer in South Carolina faced a potential tax liability of over $500 million,” the department said in a Dec. 1 reply filed with the state Administrative Law Court (ALC).

Due to the potential liability at issue, “Amazon’s continued refusal to collect and remit sales and use tax puts South Carolina’s tax base at risk,” the department said in support of its motion for an injunction, asking the ALC order Amazon Services LLC to start collecting taxes on third-party sales facilitated through its marketplace platform and deposit the monies into a trust pending the company’s legal challenge of a tax assessment. The motion also requested an expedited hearing.

The department said in its reply that the monies at issue would be placed in a trust and remitted to Amazon if the company prevails. Even if the court ultimately decides that Amazon isn’t the retailer for sales of third-party owned property, either those suppliers or its customers would be responsible for paying the taxes, and identifying and collecting such debts would result in “a tremendous administrative burden,” the department argued.

Bonnie Swingle, a spokeswoman for the department, told Bloomberg Tax Dec. 5 that the administrative law judge hasn’t set a hearing date to consider the motion for injunction.

Broad Implications

The department argued in its opening motion that Amazon continues to shirk collecting tax on third-party marketplace sales to South Carolina customers, and if those taxes continue to go unpaid, the state could lose over $500 million in unpaid sales and use taxes by the litigation’s end—which the department suggested could take five years if the case is appealed to the U.S. Supreme Court.

The department’s reply countered Amazon’s argument that the request for a court order was illegal, without merit, and misguided. The issue came before the ALC after the company challenged a June assessment of nearly $12.5 million in uncollected taxes, penalties, and interest.

Amazon began collecting sales tax for South Carolina last year, after a five year “safe harbor” on such assessments expired. However, according to the department, the company owes $9.6 million in uncollected taxes from third-party sales during the first quarter of 2016 and millions more in penalties, interest, and continuing liability.

Any ruling could have broad revenue implications, even beyond South Carolina. According to the department, it has been contacted by other states “who are closely monitoring this case and are considering plans to tax Amazon under existing statues similar to South Carolina’s sales tax laws.”

The case is Amazon Servs., LLC v. S.C. Dep’t of Revenue , S.C. Admin. Law Ct., No. 17-ALJ-17-0238-CC, reply filed 12/1/17 .

To contact the reporter on this story: Andrew M. Ballard in Raleigh, N.C. at

To contact the editor responsible for this story: Cheryl Saenz at

For More Information

Text of the DOR's motion for injunction is at

Text of Amazon's objection is at

Text of the DOR's reply is at

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