Economic nexus policies for marketplace facilitators have settled in recent years, but retroactive liability for prior periods has emerged as a significant sales tax liability risk for online marketplace facilitators. A pair of 2026 state court decisions from South Carolina and Wisconsin illustrates this significant and converging trend in state sales tax jurisprudence for online marketplaces. Amazon Services, LLC v. South Carolina Department of Revenue and Stubhub, Inc. v. Wisconsin Department of Revenue are indicative of the sales tax exposure risks for online marketplace platforms under pre-marketplace statutory frameworks. In high-stakes legal practice, the author of this article frequently encountered state tax authorities enforcing similar, and arguably retroactive, policies for pre-marketplace law tax periods, despite assurances in law and guidance that marketplace obligations would not be retroactively enforced.
Taken together, the cases establish that a platform’s active control over facilitated transactions may be sufficient to render the platform a taxable “seller” or a party “engaged in the business of selling” and therefore required to collect and remit tax on behalf of third-party sellers–including for pre-marketplace law periods in South Carolina in Wisconsin. In both cases, arguments that the platforms acted as “mere facilitators” were unsuccessful. The decisions also weaken taxpayer arguments that subsequent marketplace facilitator legislation shielded platforms from prior-period liability and carry significant implications for how other states may interpret and enforce pre-marketplace sales tax laws against online platforms. These decisions make early, proactive review of prior-period liability a critical part of marketplace tax risk management. Timely counseling on historical liability exposure has never been more important and online marketplaces should promptly evaluate potential historical sales tax exposure before it becomes a larger controversy.
Case Backgrounds and Pre-Marketplace Statutory Framework in South Carolina and Wisconsin
A Transactional Approach: Stubhub, Inc. V. Wisconsin Department of Revenue
In Stubhub, Inc. v. Wisconsin Department of Revenue, 2026 WI App. 7, 01/13/2026, the Court of Appeals (an intermediate state appellate court) reversed a lower court order and ruled that an online ticket seller was subject to over $17 million in sales tax, penalties, and interest for sales that occurred through the seller’s platform from 2008 to 2013. The Wisconsin Department of Revenue appealed from the lower court order reversing a decision of the Wisconsin Tax Appeals Commission in which the Commission originally found in favor of the Department that the ticket seller was subject to sales tax as “a person selling” admissions to recreational events in Wisconsin under Wis. Stat. § 77.52(2)(a)(2) for sales through its platform from 2008 through 2013. Wisconsin’s marketplace facilitator law did not take effect until January 1, 2020, and the periods at issue in the case turned entirely on the pre-marketplace statutory framework.
Wisconsin imposes sales tax on the sale of admissions to recreational events. The statute defines a seller as “every person selling” under Wis. Stat. § 77.51(17). Acknowledging the inherent circularity of the state’s sales tax definitions of “sale” and “seller,” the Wisconsin appeals court turned to both statutory and dictionary definitions to identify who, functionally, acted as a “seller” making the sale of tickets via Stubhub’s platform. Applying these definitions, the court concluded that Stubhub was a person selling, and therefore a “seller,” required to collect and remit tax under the pre-marketplace statutory framework. By identifying the “sale”—the transfer in exchange for money—the court identified the “seller.”
The court focused its analysis on the transactional nature of Stubhub’s activities in effecting the sale by transferring the tickets in exchange for payment: Stubhub processed the transactions, charged the purchaser’s payment method, deducted its fees, and transferred the balance of the payment to the ticketholder. In practice, the court noted, Stubhub was the only entity that purchasers encountered during the sales transaction.
The Integral Party: Amazon Services, LLC v. South Carolina Department of Revenue
In Amazon Services, LLC v. South Carolina Department of Revenue, Case No. 2024-000625, 03/28/2026, the appeal to the South Carolina high court arose from an administrative law court decision that Amazon was responsible for collecting and remitting sales tax on behalf of third-party sellers making sales into South Carolina. The original tax assessment, totaling over $12 million in sales tax, penalties, and interest, concerned sales tax periods for the first quarter of 2016, although South Carolina’s marketplace facilitator law did not take effect until April 26, 2019.
A divided South Carolina Supreme Court, split in a 3-to-2 decision, affirmed the administrative law court, determining that Amazon, though perhaps not a “seller” per se, was nevertheless “engaged . . . in the business of selling” within the meaning of S.C. Code Ann. 12-36-910(A) and was thus required to collect and remit sales tax on behalf of third-party sellers.
Distinct from the reasoning in Stubhub, Inc., the court in Amazon Services, LLC was not focused on the state’s pre-marketplace definition of a “seller”—a term absent from the relevant statutory section and thus, according to the court, not the relevant inquiry to determine responsibility for the tax. Instead, the Amazon Services, LLC court focused on the platform’s integral involvement in the “sale,” and thus whether it was “engaged . . . in the business of selling” by obtaining, directly or indirectly, “gain, profit, benefit, or advantage” as a result of the facilitated sale. For this analysis, the court turned to the Business Solutions Agreement governing the relationship between the platform and third-party sellers. Pursuant to the agreement, the platform: regulated third-parties’ ability to set prices; established criteria for listing products; controlled notification to third-parties and customers regarding sales; notified a related entity to process payment; dictated communication between third-party sellers and purchasers; handled returns; and controlled disbursement of funds between purchasers and third-party sellers. Thus, the platform was so integral to each transaction effected via its platform such that no sale could occur without actions taken by it.
Neither Platform Acted as a “Mere Facilitator” in the Transaction
In both cases, the platforms argued that they acted as passive intermediaries, merely facilitating the transactions by third-party independent sellers that actually constituted the taxable sale between seller and purchaser. In both instances, the courts rejected these arguments.
Relying on the platform’s transactional focus, the Wisconsin appeals court noted that the platform’s “role is not as passive as [the platform] would have us believe” based on its involvement in effecting the transfer of tickets between seller and purchaser. The South Carolina Supreme Court went an analytical step further, articulating a clear “stopping point” that distinguished the platform at issue in that case from other third parties that play a role in similar transactions, such as credit card companies, banks, delivery companies, and advertisers providing services merely “incidental” to the transaction. Unlike the platform in Amazon Services, LLC, which exerted comprehensive control over third-party sales via the platform, the companies providing “incidental” services may aid the sale, but the court found there was nothing requiring their specific involvement in order for a sale to occur.
Platforms’ Arguments Rejected Concerning States’ Later Adoption of Marketplace Facilitator Laws
Both platforms argued that the subsequent enactment of marketplace facilitator legislation in South Carolina and Wisconsin, respectively, demonstrated that no obligation existed prior to adoption of the marketplace laws in each state. Both courts rejected this argument.
In Wisconsin, the court found that the Department’s initial approach with the legislature indicated the state’s marketplace law amounted to a clarification of existing law rather than a substantive change. Similar to the rationale in Recht-Goldin-Siegal Const., Inc. v. Wisconsin Department of Revenue, 219 N.W.2d 379 (1974), the court observed that the legislature’s further enumeration of specific persons required to collect and remit tax by adding “marketplace providers” to the definition of “a person selling” indicated the January 1, 2020 amendment was intended to clarify, rather than change, existing law.
In South Carolina, the law-change argument was disposed of on narrower, but equally dispositive, grounds: the Department applied the South Carolina Sales and Use Tax Act as codified in 2016 to Amazon Services’ business model in the original liability determination. The 2019 administrative determination was issued before the General Assembly’s legislative debate and subsequent enactment of South Carolina’s marketplace facilitator law. Thus, the Department could not have applied that law retroactively, and instead applied the law as written in 2016. The South Carolina Supreme Court did not go so far as to opine whether the marketplace law amounted to a change or clarification of the sales tax laws.
Pre-Marketplace Periods May Present Risks to Platforms Exerting Sufficient Control Over Facilitated Transactions
Together, Amazon Services, LLC and Stubhub, Inc. serve as an important benchmark for tax practitioners advising online marketplace platforms. While these decisions arise from the specific statutory frameworks of South Carolina and Wisconsin, their reasoning is broadly instructive: courts are willing to look past a platform’s self-characterization as a passive intermediary and examine the functional reality of its role in facilitating transactions.
Practitioners should be particularly alert to the retroactive exposure these decisions create, as the courts’ willingness to impose liability under pre-marketplace statutory frameworks signals that similar arguments may gain traction in other jurisdictions. The divergent but complementary analytical approaches taken by the two courts — Wisconsin’s transactional focus on who effected the sale and South Carolina’s broader “integral party” standard — also suggest that practitioners cannot rely on a single, uniform defense strategy across jurisdictions. Given the author’s own experience with state tax authorities enforcing similar positions for pre-marketplace periods, these decisions are unlikely to be the last of their kind, and proactive counseling on historical liability exposure has never been more important.
CoCounsel and Checkpoint Resources
- Checkpoint subscribers can diver deeper into marketplace topics with:
- 28 Nexus Assistant Charts: covering nuances of marketplace facilitators, including nexus, collection and remittance obligations, and industry-specific marketplace statutory frameworks.
- Catalyst Topic # 1050, Sales and Use Tax Nexus: covering nuances of physical presence, economic nexus, and threshold computation for marketplace facilitators.
- Catalyst Topic # 1051, Electronically Delivered Goods and Services: covering sales and use tax obligations of online platform sellers, such as marketplace facilitators, accommodations intermediaries, food delivery services, and peer-to-peer car sharing networks.
- State Explanations (23,120): providing state-specific nexus overviews and marketplace facilitator sales and use tax obligations.
- Articles:Before Economic Nexus There Was Physical Presence Nexus: Why Overlooking Your Physical Footprint Creates Sales Tax Risk
- CoCounsel subscribers can retrieve helpful information and marketplace resources, including detailed sales tax nexus risk assessments using the Evaluate Sales Tax Nexus Risk of Remote Employee in State Template. This Catalyst-authored prompt delivers comprehensive analysis of a state’s current physical presence nexus position based on expert Checkpoint commentary and the law itself. Fine-tune CoCounsel’s output to your needs with follow-up questions.
- Additional nexus-related CoCounsel Templates:
- Indicate Sales Tax Economic Nexus Threshold and Composition
- Indicate State’s Approach to Economic Nexus for Corporate Net Income Tax Purposes
- Indicate Approach to P.L. 86-272 and Internet Activities
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