By Maria T. Albanese, JD, LL.M, Checkpoint News
The South Carolina Supreme Court affirmed a decision by the South Carolina Court of Appeals, which affirmed an Administrative Law Court (ALC) order upholding a $12,490,502.15 assessment by the South Carolina Department of Revenue for unpaid sales tax, penalties, and interest. The assessment stemmed from the Amazon Services, LLC’s (“Amazon”) failure to collect and remit sales taxes on transactions involving third-party merchants on Amazon’s website selling to South Carolina residents during the first quarter of 2016. (Amazon Services, LLC v. S.C. Dept. of Rev., S.C. S. Ct. Case No. 28319, 03/18/2026.)
Violation of Due Process Challenge
Amazon argued that it was not a “seller” as defined in as defined in S.C. Code Ann. § 12-36-70(1)(A), because it did not directly own or sell the goods, and therefore applying the tax obligation retroactively to marketplace facilitators violated due process because the legislature did not explicitly require marketplace facilitators to collect tax until Act 21 of 2019. The court noted that the Department had applied the statute as written in 2016, well before Act 21 was enacted, and therefore there was no retroactive application and no due process violation.
“Engaged in Business of Selling” vs. “Seller”
The court instead focused on the phrase “engaged . . . in the business of selling”, under S.C. Code Ann. § 12-36-910(A) of the South Carolina Sales and Use Tax Act, which provides “a sales tax, equal to 5% of the gross proceeds of sales, is imposed upon every person engaged or continuing within this State in the business of selling tangible personal property at retail.” The court interpreted “engaged” according to ordinary usage, i.e., “involved in activity” or “employ or involve oneself. ” The court concluded that Amazon’s involvement in third-party transactions made it integral to the sale process, as it had extensive control over third-party sales, including setting pricing rules; controlling product listings and customer notifications; managing payment processing via Amazon Payments; handling shipping notifications and returns; and disbursing funds to sellers after deducting fees. Because Amazon’s actions were essential to every third-party transaction, the court found it was “engaged in the business of selling,” and not merely providing incidental services. Amazon structured its business model in a way that provided it with comprehensive control, which was so significant that a third-party transaction could not occur on Amazon.com without actions taken by Amazon. Furthermore, the court found S.C. Code Ann. § 12-36-910(A) to be unambiguous, and therefore the text could be applied as written, and rejected Amazon’s argument that it needed to apply the rules of statutory construction, which resolves any doubt in favor of the taxpayer.
Holding
The supreme court affirmed the court of appeals ruling that upheld the assessment, holding that Amazon was “engaged in the business of selling” within the meaning of S.C. Code Ann. § 12-36-910(A), even though it did not own or directly sell the goods involved in third-party transactions.
Dissent: The dissent stated that Amazon could plausibly argue it was not receiving consideration “for” the sale (only service fees), and thus not “engaged in the business of selling.” The dissent found both interpretations of the statute reasonable, creating substantial doubt, and that under established precedent, doubt in tax statutes must be resolved in favor of the taxpayer.
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