Why This Matters Now
A major decision came out this week from the South Carolina Supreme Court, and it’s one every business with marketplace activity should be paying attention to. In Amazon Services, LLC v. South Carolina Department of Revenue, the court held that Amazon was required to collect and remit sales tax on third-party marketplace sales as early as 2016, well before marketplace facilitator laws were enacted.
After Amazon’s South Carolina tax agreement expired in 2016, it began collecting tax on its own sales, but not on third-party sales made through its platform. South Carolina disagreed and took the position that Amazon was the retailer responsible for the transaction, not just a service provider facilitating sales.
The court ultimately agreed with the state.
Why This Is a Big Deal
Most companies think marketplace obligations began after South Dakota v. Wayfair. This case says otherwise. South Carolina successfully argued that its existing statutes already required collection, even before marketplace laws were formally adopted. The decision turns on one key issue: who is the seller? If your platform controls the transaction, payments, fulfillment, customer interaction, states may take the position that you are the retailer, regardless of how contracts are structured. This is not about future compliance; it’s about lookback exposure. This ruling opens the door for states to assess tax, penalties, and interest for prior periods where businesses assumed no obligation existed.
Action Plan
If your business has marketplace activity, now is the time to take a closer look:
- Review prior periods (pre-2019): Identify where marketplace sales occurred and how tax was handled.
- Evaluate your role in the transaction: Were you acting more like a facilitator, or a retailer?
- Assess exposure: Determine whether there is potential liability in states like South Carolina.
- Consider proactive solutions: Voluntary disclosure agreements (VDAs) may help limit penalties and lookback periods.
The South Carolina Amazon decision is a clear signal sales tax risk doesn’t start when laws change, it starts when your business activity fits within existing statutes. If your company operated in the marketplace space before facilitator laws were enacted, now is the time to reassess your position and address any potential exposure proactively.