Amicus document presented to the South Carolina State Taxation Board Parker Poe Adams and Bernstein LLP

The main issue raised in the appeal is whether the South Carolina Revenue Department can impose a sales tax liability on Amazon for sales made on Amazon.com by independent third parties prior to specific legislative authorization for that responsibility.

On behalf of COST, Kay and Madison argue that the department’s unilateral expansion of this charge exceeds the department’s statutory authority and runs counter to legislative intent. In recent legislation, the South Carolina General Assembly addressed the taxation of “market facilitators” like Amazon for the first time. Although it authorized Amazon’s taxation on third-party sales, it did so only prospectively. Notably, South Carolina is the only state in the country that has sought to apply market enabler legislation retroactively.

In the lower court case, the South Carolina Administrative Court ruled that Amazon – which collects payments from customers who purchase products sold by independent third parties on the Amazon market – must collect and remit taxes on those sales. Despite the prospective nature of the legislation, the court ruled that this liability extends to periods prior to the new law authorizing Amazon’s taxation on these sales.

The amicus brief argues that the imposition of new responsibility for collecting taxes before the legislation comes into force is not legally authorized and should be reversed. The paper further argues that the imposition of taxes in the absence of legislation contradicts two fundamental principles of good tax administration: notification and justice.

The case has the potential to be a test case for the retroactive imposition of sales tax collection responsibilities in light of the historic United States Supreme Court decision on South Dakota v. Wayfair. In that case, the court expressed significant concern about the states responding to its decision by retroactively applying sales tax.