Amazon Sellers: SC Supreme Court Sales Tax Ruling
If you sell on Amazon, it’s easy to assume sales tax collection is always “Amazon’s responsibility.” In many states today, that is often true because marketplace facilitator laws require platforms to collect and remit tax on marketplace sales. But a recent South Carolina Supreme Court decision is a reminder that states can still examine older periods and older statutory frameworks—and they may impose tax collection responsibility based on how a marketplace actually operates.
On March 18, 2026, the South Carolina Supreme Court decided Amazon Services, LLC v. South Carolina Department of Revenue (Opinion No. 28319) and affirmed a $12,490,502.15 assessment for sales tax, penalties, and interest tied to third-party marketplace sales on Amazon.com during the first three months of 2016.
This discussion explains what happened in the case, what the Court focused on, and what Amazon Sellers and other South Carolina business owners should take away from the decision.
What is the Amazon Dispute All About?
The parties did not dispute that sales tax was due on the transactions at issue. The core question was who had the legal duty to collect and remit it: the individual third-party seller, or Amazon Services as the marketplace operator.
The tax dispute arose from an audit tied to a transition period in South Carolina. The Court described how Amazon and affiliates previously operated under a structure that resulted in no sales tax on certain sales in South Carolina from 2011 through 2015, and then beginning in January 2016 Amazon started collecting and remitting on its own and affiliate sales—but not on sales by third-party merchants.
Third-party selling is not a niche part of Amazon’s business model. The Court referenced record evidence that Amazon had approximately 2.5 million active third-party merchants at the time and that about 50% of transactions on Amazon.com were made by third-party merchants.
Why This Supreme Court Case Matters to Amazon Sellers Today
Most Amazon Sellers are not going to receive a seven-figure sales tax assessment. But this case still matters because it helps answer three practical questions that come up constantly for marketplace businesses:
First, how does a state decide who is the “responsible party” for sales tax when there are multiple businesses involved in one transaction? Second, how much does a marketplace’s control over the buying process affect that analysis? And third, what should Amazon Sellers know about compliance, audits, and documentation in South Carolina and other states?
The Court’s decision provides a clear framework: the more a platform controls the transaction, the more likely a state may treat the platform as being “in the business of selling” (even if a third party supplies the product).
What the South Carolina Supreme Court Actually Decided
The Court focused on S.C. Code § 12-36-910(A), which imposes sales tax on every person “engaged or continuing within this State in the business of selling” tangible personal property at retail.
A key point: the Court explained that the statute it was applying did not require Amazon to be the “seller” as defined in a different provision. Instead, the question under § 12-36-910(A) was whether Amazon was engaged in the business of selling in South Carolina with respect to these transactions. The Court held that it was.
Why the Court said Amazon was “Engaged” in Third-Party Sales
For Amazon Sellers, the most important portion of the decision is the Court’s detailed description of how Amazon controlled third-party marketplace business transactions. The Court cited Amazon’s third-party merchant contract (the “Business Solutions Agreement”) and concluded that Amazon’s terms “tightly controlled” the transaction process.
In the Court’s description, Amazon’s involvement included controlling product listings and rules, managing aspects of payment processing through Amazon Payments, controlling certain customer communications and notifications, handling returns in important ways, and disbursing funds to merchants after collecting Amazon’s fees.
This “control” analysis is the heart of the ruling. The Court’s view was that the third-party sale could not occur on Amazon.com without Amazon’s actions and infrastructure, making Amazon’s role more than merely “supportive.”
The “Slippery Slope” Argument and Why it Failed
Amazon argued that if its level of involvement made it responsible for sales tax, then other companies involved in transactions—such as payment processors, banks, credit card companies, shipping companies, and advertisers—might also be treated as “in the business of selling.”
The Court rejected that comparison. It reasoned that Amazon’s role was different because Amazon’s actions were integral to the completion of the transaction on Amazon.com, while other service providers typically provide services that are incidental to a sale rather than controlling the sale itself.
Why the Court Did Not Accept a “Hands Off” Characterization of Amazon’s Marketplace
From the seller side, it is common to think of the marketplace like a digital “shopping mall”—individual sellers run their own stores, and the mall owner just provides space. The Court did not accept that analogy for the tax period at issue. The Court’s reading of the record treated Amazon as orchestrating core components of the purchase flow: presentation, payment, and the pathway by which orders are processed and funds are distributed.
Practical Takeaways for Amazon Sellers and SC Business Owners
1) Don’t confuse “today’s rule” with “yesterday’s liability”
Many sellers are familiar with the modern marketplace facilitator landscape where platforms collect and remit. But audits can look back, and law changes often draw lines by date. This case is about a specific period (early 2016) and South Carolina’s statutory structure at that time. The broader takeaway is that a state can assess based on the rules and business structure in effect during the audit period.
If you have older operations—particularly if you sold through multiple channels or had periods of transition—you should assume a state could ask questions about how tax was handled then.
2) Expect regulators to analyze “control” and “transaction flow”
Even if you’re not a marketplace operator, the control-based reasoning is useful. If your business uses third-party payment flows, third-party fulfillment, drop-shipping structures, or multi-party sales arrangements, you should assume that in disputes (tax or otherwise) regulators will analyze who controls the checkout, who receives the money, and who has authority over the customer relationship.
For sellers, this means your contracts and platform terms matter, but your day-to-day operational reality matters more.
3) Documentation is your best friend in audits
One of the practical lessons from disputes like this is that the “paper trail” tends to drive outcomes. Amazon Sellers should keep clean records that can answer basic questions quickly:
You don’t need to be an accountant to benefit from this discipline. You just need to be able to show how your sales were structured and where tax responsibility sat for the period under review.
4) If you sell on multiple channels, your tax risk is not uniform
Many Amazon Sellers also sell through their own Shopify site, wholesale accounts, in-person sales, or other platforms. The compliance rules can differ by channel, and the fact that “Amazon collects on Amazon” does not automatically answer what happens off-Amazon.
If you are expanding into a multi-channel model in South Carolina, it’s smart to confirm which transactions are marketplace-collected and which are your direct responsibility.
5) Consider proactive compliance reviews before growth spurts
This is the attorney perspective we see most often: companies don’t get into trouble because they intended to avoid taxes; they get into trouble because growth outruns process. A quick compliance review—especially before adding new SKUs, new fulfillment methods, or new states—can prevent costly cleanup.
What This Ruling Does Not Mean
It’s also important not to overread the case. This decision does not automatically mean individual Amazon Sellers are off the hook for sales tax compliance generally. Sellers still have responsibilities for other taxes and filings, and responsibilities can change depending on where sales occur and how state rules apply.
It also does not mean that every platform in every state will be treated the same way. The Court’s analysis was grounded in South Carolina’s statute, the audit period, and the record about how Amazon controlled the transaction.
Bottom Line
For Amazon Sellers and South Carolina entrepreneurs, Amazon v. SCDOR is a useful case study in how states determine tax responsibility when a sale involves multiple parties. The South Carolina Supreme Court’s decision emphasizes operational reality: when a marketplace controls critical aspects of the transaction, a state may treat it as being “engaged in the business of selling,” even for third-party marketplace transactions.
If your business is growing on Amazon, expanding into multi-channel sales, or cleaning up legacy compliance issues, it may be worth reviewing your sales-tax posture now—before an audit forces the issue.