Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...
The South Carolina Department of Revenue is asking a court to mandate Amazon collect tax on third-party marketplace sales while the state and retail behemoth battle over whether the company is obligated to collect taxes on those transactions.
The DOR filed Nov. 8 a motion requesting 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 Amazon.com Inc. subsidiary received a June assessment for almost $12.5 million in uncollected taxes, penalties, and interest Amazon Servs., LLC v. S.C. Dep’t of Revenue , S.C. Admin. Law. Ct., No. 17-ALJ-17-0238-CC, motion filed 11/8/17 .
Amazon’s challenge, filed July 21, claims the DOR’s assessment is unconstitutional and violates state and federal law. Amazon began collecting sales tax for South Carolina last year. However, according to the state DOR, the company owes $9.6 million in uncollected taxes from third-party sales during the first quarter of 2016 and almost $3 million in penalties and interest that continue to accrue.
“By avoiding these taxes, Amazon enjoys a competitive economic advantage over South Carolina brick-and-mortar retailers,” according to the DOR’s motion. “More importantly, Amazon’s failure to collect and remit sales and use tax to South Carolina during the pendency of this action poses an immediate threat to the State’s financial health and economic stability.”
The DOR argued 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 DOR suggested could take five years if the case is appealed to the U.S. Supreme Court.
“There is no guarantee that Amazon will be able to pay the State its current or future tax liability—especially in light of the significant amount of the potential tax liability,” the DOR argued, adding that “given the ever-changing economic climate and the competitive nature of the retail industry, the Department (and the State) should not be forced to assume this kind of financial risk.” And if a DOR victory encourages other states to file similar suits, there is no guarantee that the tax owed to South Carolina will have priority over Amazon’s tax obligations in other states.
The DOR requested the ALC hear the motion on an expedited basis, prior to any hearing on the merits. A hearing on the merits is scheduled for November 2018.
To contact the reporter on this story: Jennifer McLoughlin in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Cheryl Saenz at email@example.com
The Department of Revenue's motion is at http://src.bna.com/t9p.
Copyright © 2017 Tax Management Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)