Bass, Berry & Sims attorney Steve Jasper discussed the ongoing case between Amazon Services and the South Carolina Department of Revenue in an article for Law360 highlighting the top five state and local tax cases to watch during the second half of 2020.

The state’s revenue department imposed a $12.5 million tax assessment on sales of third-party products through Amazon’s website in the first quarter of 2016 – three years before the state enacted a marketplace facilitator law. Amazon challenged the tax, but it was upheld at the administrative level. Amazon appealed to court, and parties finished their arguments on appeal in June 2020.

One of Amazon’s arguments is that it cannot be labeled and taxed as a seller prior to the enactment of South Carolina’s marketplace facilitator law that expressly gives facilitators the responsibility for collecting and remitting sales tax. Steve noted that the ALJ rejected that argument, finding the adoption of the marketplace facilitator statute not relevant.

Steve disagreed.  If it is appropriate to tax a marketplace facilitator, the correct way is to get a statute adopted rather than trying to bend an old rule to fit new circumstances, he added. “Because when you do that, when you try to force it, you end up making bright line rules that were never intended and are bad law for other taxpayers.”

The full article, “5 State & Local Tax Cases to Watch in the 2nd Half of 2020,” was published by Law360 on July 10 and is available online.