A divided S.C. Supreme Court has ruled that Amazon.com owed the state more than $12.5 million in back taxes and penalties for goods sold through its website a decade ago by independent retailers.
The 3-2 decision was announced March 18. It upheld two previous rulings — one by the S.C. Court of Appeals in 2024 and the other by S.C. Administrative Law Court in 2019.
The judge in the original case found that the S.C. Department of Revenue “correctly determined that Amazon … owed the taxes and lawfully imposed the penalties and interest.”
The origins of the dispute goes back to 2011, when Amazon was planning to invest $125 million in a Lexington County distribution center and create 2,000 jobs. In exchange, state lawmakers gave the company a five-year waiver from collecting sales taxes.
The Department of Revenue began reviewing Amazon’s books soon after the exemption went away in 2016. At the same time, a law had just taken effect requiring out-of-state online retailers to pay taxes if their sales in South Carolina exceeded $100,000.
The agency looked at purchases through Amazon’s widely used Marketplace over a three-month period. It determined the company owed the state about $9.6 million in back taxes, plus $2.9 million in interest and penalties, for items that independent merchants had sold through the platform.
The company contested the audit’s findings in 2018.
Amazon’s core argument has always been that it “was not in the business of selling” goods. Rather, it stressed that its role was limited to earning a service fee for running an online shopping mall while also handling some routine functions for its independent merchants, such as shipping and processing payments.
It also argued that it didn’t own the products that were being bought and sold on its platform.
Numerous pro-business groups filed legal arguments in defense of the company, from the S.C. Chamber of Commerce to the National Retail Federation.
The Supreme Court agreed to review the case in October 2024. It heard oral arguments last May.
The majority wasn’t swayed.
Justices John Few, Gary Hill and George James wrote Wednesday that Amazon was “engaged in the business of selling” because it had “structured its business model in such a way” that it maintained “comprehensive control” over all third-party transactions.
Chief Justice John Kittredge dissented, with Justice Courtney Clyburn Pope concurring with his written opinion. Kittredge said that in the past the high court has sided with litigants that raise “substantial doubt” about how state tax laws are applied, requiring it to rule in Amazon’s favor.
The Seattle-based company was required to deposit the disputed amount with the state before the Court of Appeals would take the case.
A spokesperson said Amazon was reviewing Wednesday’s ruling.
“We take great care to comply with evolving tax laws in all states and continue to believe that we complied with our tax obligations in South Carolina” according to a written statement.
