South Carolina Goes After Amazon as Marketplace Facilitator | All Internet Retailers and Marketplace Providers Under Attack

WARNING: All Internet retailers and marketplace providers should pay attention.

South Carolina is going after Amazon (the marketplace facilitator) for not collecting sales tax on behalf of the businesses that use the marketplace to sell products to SC residents (see CNBC article, "Amazon faces a tax fight in South Carolina that could change how online sellers do business").

This is a very interesting development since the Multistate Tax Commission is trying to get retailers that sell through marketplace facilitators to collect sales tax (see MTC Voluntary Disclosure initiative).

According to the CNBC article, "South Carolina is arguing that under state law, Amazon is considered the seller because the company controls a large part of the sales process for its third-party merchants."

Each state has different imposition statutes and ability to reach a conclusion that South Carolina is attempting to reach. But as the article suggests, if South Carolina is successful, other states will play the copycat game; OR perhaps South Carolina is the one playing the copycat game, since Minnesota, Washington and Rhode Island recently passed legislation to impose sales tax collection responsibilities on marketplace providers.

Minnesota and Washington laws are already under attack (see BNA articles, "Minnesota Marketplace Law Ripe for Legal Challenge" and "Washington’s Marketplace Sales Tax Law Heading for Battle"). Washington's definition of seller “includes marketplace facilitators, whether making sales in their own right or on behalf of marketplace sellers, and referrers.” Rhode Island describes marketplace providers as "retail sale facilitators." Check out Rhode Island's website for more notices and details.

All of the above is going on at the same time that states are imposing burdensome use tax notice and reporting requirements on retailers that are NOT currently collecting sales tax (because they don't have a legal obligation to do so). Consequently, states are forcing retailers to simply take the easier compliance task of collecting and remitting sales tax (versus complying with use tax notice and reporting requirements). 

It's a whole new world where states are trying to get sales tax revenue from anyone and everyone. Stay tuned.