South Carolina’s tax collection agency is seeking a court order that would force Amazon to pay $57 million in sales taxes the state says the online distributor owed last year.
The state Department of Revenue filed a motion this week asking a state administrative court to order Amazon set aside all sales tax revenue it receives from purchases by South Carolina residents until the case is settled.
South Carolina exempted Amazon from the sales tax on its online sales for five years after the company built a Lexington County distribution center in 2011. State law normally requires a company collect the tax if it has a physical presence in the state, but lawmakers agreed to temporarily waive those requirements in exchange for Amazon fulfillment centers in West Columbia and Spartanburg. That exemption ended last year.
The company has since only collected sales taxes for its “Amazon Prime” members, who sign up for free delivery and other benefits. Amazon officials maintain they only act as an intermediary between customers and sellers and it is the suppliers selling on the site who must collect the sales tax.
Department of Revenue officials challenged the structure last year, after Amazon held to its position and refused to pay sales taxes on non-Prime sales for the first three months of 2016. Now Amazon has appealed to the state Administrative Law Court, who will hear arguments in November 2018. The Department of Revenue is asking the court to order Amazon collect the disputed sales taxes at least until the case is settled, arguing the online retailer would elude $500 million in eventual taxes if the case makes it all the way to the state Supreme Court.
The agency maintains Amazon’s failure to collect and remit the taxes gives it an unfair advantage over other retailers which do include the tax price on purchases.
“This advantage threatens to put compliant taxpayers out of business,” the Department of Revenue’s motion states.