Politics & Government

SC court says Amazon must pay up on third-party sales

A South Carolina court says Amazon owes the state sales tax from transactions third-party vendors have made selling goods to S.C. shoppers through the online retail giant’s website.

The ruling signed by Chief Administrative Law Judge Ralph King Anderson does not specify the amount that Amazon now owes to the state.

But state lawmakers hope it will mean millions of dollars in new money to flow into the state’s coffers that could help pay for higher pay raises for classroom teachers or pay for much-needed upgrades at the state’s prisons. The S.C. Department of Revenue now “will calculate the specific amount of taxes owed on the sales at issue in this case,” the ruling said.

State revenue director Hartley Powell said Tuesday the agency is pleased with the decision, “affirming what the department has maintained from the beginning.”

“Amazon is a retailer, and all retailers, whether online or brick and mortar, are required to collect and remit sales tax due the state,” he said.

In 2017, the state challenged Amazon, arguing it failed to collect nearly $12.5 million in taxes, penalties and interest for the period of Jan. 1, 2016 through March 31, 2016 on third-party sales. Amazon argued that third-party sellers, not them, are responsible for collecting and remitting the taxes.

Yet in its 54-page ruling Tuesday, the S.C. Administrative Law Court wrote that Amazon, as the “point of sale for all transactions on the (Amazon) Marketplace, ... clearly has the responsibility to collect the sales and uses taxes owed for these transactions” and has the ability through its website to collect the tax.

In a statement provided to The State, an Amazon spokesperson called the court’s decision “inconsistent with the facts established at trial and the applicable law.”

“Amazon has long supported marketplace laws like the one South Carolina passed in April because they provide essential fairness for all sellers and marketplaces, more revenue for states and a simplified administration of the sales tax,” the spokesperson said. “Amazon is in full compliance with marketplace laws in 36 states, including South Carolina, and the District of Columbia.”

In April, Gov. Henry McMaster signed legislation seeking to clarify to retailers — particularly Amazon, which has warehouses in South Carolina — that retailers are required to collect sales tax on third-party vendors that have S.C. shoppers.

The millions in Amazon’s third-party sales-tax collections the state could receive follow more than $40 million the state has received already, thanks to a U.S. Supreme Court decision in 2018 that said states could slap a sales tax on online retailers without a physical presence in the state.

The court’s ruling reversed its previous 1992 decision, now requiring out-of-state retailers — for example, household goods retailer Wayfair — to collect sales tax if they conduct at least $100,000 in gross sales on at least 200 transactions in the state they sell in.

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Maayan Schechter (My-yahn Schek-ter) covers the S.C. State House and politics for The State. She grew up in Atlanta, Ga. and graduated from the University of North Carolina-Asheville. She has previously worked at the Aiken Standard and the Greenville News.
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