Amazon Sees ‘No Basis’ for South Carolina’s Tax Collection Request

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By Andrew M. Ballard

Amazon is fighting the South Carolina Department of Revenue’s request for a court order mandating the collection of taxes on third-party marketplace sales while the parties clash over the issue.

The DOR filed Nov. 8 a motion asking the state Administrative Law Court (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.

In a Nov. 22 objection to the motion, the online retailer said the state’s request was illegal, without merit, and misguided. “Viewed in the best possible light, the request for injunctive relief is a wild swing to compel unprecedented tax collection without justification or factual or legal basis,” the company argued ( Amazon Servs., LLC v. S.C. Dep’t of Revenue , No. 17-ALJ-17-0238-CC, objection filed 11/22/17 ).

The DOR sent Amazon Services a bill in June for nearly $12.5 million in uncollected taxes, penalties, and interest, an assessment that triggered the company’s legal challenge.

‘Fighting Retreat’

Rick Reames, a state and local tax attorney with Nexsen Pruet in Columbia, S.C., said that the department “appears to be simply trying to bring the matter to expeditious conclusion.” Reames was the director of the DOR at the time the Amazon matter was initiated and has had no involvement in the case since his return to private practice.

“Large taxpayers often use litigation as a fighting retreat,” Reames told Bloomberg Tax Nov. 28. The DOR “appears to be trying to counter that approach and resolve a tax dispute in a timely manner,” he said.

But Amazon said in its objection that the department is making a novel argument that the company is responsible for collecting and remitting tax on sales made by other businesses. According to the retail behemoth, the DOR never before has sought expedited injunctive relief in a tax matter and “the main premise of the motion appears to be that Amazon is at risk of going bankrupt and therefore the case needs to be resolved quickly,” a claim that is baseless.

The company argued that the department is legally barred from seeking the requested relief and has failed to demonstrate the need for such an order. Furthermore, “it would impose on Amazon Services the affirmative, mandatory, and unprecedented burden of collecting taxes that the Department acknowledges might by owed by others.”

Amazon recently informed marketplace sellers on its platform that it will automatically collect and remit Washington state sales tax on third-party marketplace sales beginning Jan. 1. That move stems from a state law passed in June that requires sellers with gross receipts sourced to Washington of at least $10,000 to collect and remit sales or use tax or comply with certain notice and reporting requirements. Amazon hasn’t announced it will collect tax on third-party transactions in other states.

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 is at

Text of Amazon's objection is at

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