Overview of the Amazon sales tax Supreme Court case
Amazon is currently facing a pivotal legal challenge before the South Carolina Supreme Court that could reshape the sales tax landscape for online marketplaces. At issue is whether Amazon owes over $12 million in sales taxes, penalties, and interest for failing to collect tax on third-party seller transactions during Q1 of 2016, after its exemption expired at the end of 2015.
South Carolina Supreme Court on Tax Collection
The South Carolina Department of Revenue contends that Amazon exercised sufficient control over these transactions to warrant tax collection responsibility.
Lower Court Rulings and Potential Exposure
Lower courts have ruled in favor of the state. If the Supreme Court affirms those decisions, Amazon could be liable for more than $277 million in additional taxes for subsequent years. The case is especially significant because it addresses marketplace facilitator liability prior to South Carolina’s enactment of its facilitator law in 2019 and the U.S. Supreme Court’s Wayfair decision in 2018, which expanded states’ ability to require remote sellers to collect sales tax.
Implications for Marketplace Facilitators
This case has broad implications for online marketplaces and could set a powerful precedent on the retroactive application of tax obligations. A ruling against Amazon may open the door for similar enforcement actions by other states seeking to recoup sales tax revenue from pre-Wayfair periods. Online platforms and third-party sellers alike should monitor this case closely, as it may redefine historical liability in the rapidly evolving e-commerce tax environment.
Why This Amazon Sales Tax Supreme Court Case Matters
The outcome could allow states to retroactively pursue sales tax from online platforms and sellers. If you sell through marketplaces like Amazon, states may take the same approach as SC and begin auditing past sales periods, increasing the risk where businesses could face surprise tax liabilities. Not all states interpret marketplace roles the same way. This case my not put tax directly in your lap today, but it opens the door for audits, raising seller fees and tightening contractual terms.
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