In a 3-2 decision, the South Carolina Supreme Court has ruled that Amazon Services, LLC owes the state nearly $12.5 million—$9.6 million in back taxes and $2.9 million in interest and penalties—for products sold through its website in the early months of 2016.
The case originated from an administrative challenge by Amazon Services, LLC to the South Carolina Department of Revenue's tax assessment. The Department argued Amazon Services was obligated to "collect and remit sale taxes for retail sales to South Carolina customers for products sold by third-party merchants on Amazon.com," according to Justice John Cannon Few's published opinion.
Amazon Services, LLC, a subsidiary of Amazon.com, Inc., operates the company's online marketplace. Sales taxes for products sold directly by Amazon and its affiliates are not at the center of the dispute. Rather, the dispute concerns independent sellers, known as third-party merchants, who use Amazon's platform to sell their respective products, and whether Amazon is required to collect and remit sales taxes on their behalf. Essentially, the case questioned whether Amazon must act as a tax collector for the independent sellers on its platform.
At that time a decade ago, approximately 2.5 million third-party merchants were active on the website and accounted for approximately half of all Amazon sales came from these independent sellers—taxes for which Amazon did not collect. The South Carolina Supreme Court ruling contends these taxes should have been collected and given to the state.
Amazon argued that it was not legally a “seller” of third-party products under South Carolina law, since it did not own or sell the items itself. Instead, the national company asserted its role was handling routine functions for independent sellers (i.e. shipping and processing payments) and earning a service fee for running an online store.
An amicus brief was filed in May of 2024 with business organizations such as the United States Chamber of Commerce, the South Carolina Chamber of Commerce, and the Greater Chamber of Commerce backing Amazon's position.
The March 18 decision split the court. Justices John Cannon Few, D. Garrison "Gary" Hill, and George C. James Jr. affirmed the court of appeals, while Chief Justice John Kittredge and Justice Courtney Clyburn Pope dissented. Ultimately, the court's decision upholds the two previous rulings made by the South Carolina Court of Appeals in 2024 and the South Carolina Administrative Law Court in 2019.