A South Carolina judge upheld a decision by the S.C. Department of Revenue that Amazon.com owes sales tax on goods that outside merchants listed on the retailer’s website for part of 2016.
The exact amount will be determined later, according to the 54-page ruling Tuesday from the S.C. Administrative Law Court.
The dispute centered on whether the company was required at the time to collect and remit taxes on merchandise sold in South Carolina by third-party merchants using its online marketplace.
The Department of Revenue argued that it was. It sought nearly $12.5 million, including interest and penalties.
Amazon countered that it was not responsible for collecting taxes on third-party sales.
Judge Ralph K. Anderson III disagreed, finding that the Seattle-based e-commerce giant acted as the seller, even though it did not technically own the merchandise.
In a written statement Tuesday, Amazon said the "decision is inconsistent with the facts established at trial and the applicable law.”
Third-party sales involve items sold on Amazon by millions of independent sellers. The online behemoth has said its role is to bring consumers and merchants together while also handling some of the essential back-office tasks, such as shipping and payment processing.
The Department of Revenue seized on that point, saying Amazon was effectively assuming the role of the seller because it controlled so much of the process.
South Carolina granted the company a five-year grace period on sales tax collections starting in 2011. In exchange, Amazon agreed to invest $125 million and create 2,000 jobs in the state.
The Department of Revenue audited the company shortly after that reprieve expired in 2016 based on reports from buyers who said they were charged sales tax on some Amazon purchases but not others, according to a court document. The review covered the first three months of taxable sales.
The department came back with a nearly $9.6 million assessment. Interest and penalties have added at least another $2.9 million to the bill.
The dispute landed in front of Anderson about two years ago, after Amazon challenged the state's legal interpretation.
The company was still reviewing Anderson's decision Tuesday, a spokeswoman said. Amazon has not deteremined whether it appeal.
Hartley Powell, director the Department of Revenue, said in a statement that he was pleased the court affirmed the agency's orginal fiundings.
"Amazon is a retailer, and all retailers, whether online or brick and mortar, are required to collect and remit sales tax due the state," Powell said.
The case was one reason lawmakers in Columbia started requiring out-of-state retailers to collect and pay sales and use tax if they generate more than $100,000 in revenue within South Carolina. The new rules took effect Nov. 1 and were expanded to include "marketplace facilitators" such as Amazon and eBay in April.
Amazon said it "has long supported marketplace laws like the one South Carolina passed in April because they provide essential fairness for all sellers and marketplaces, more revenue for states and a simplified administration of the sales tax."
The company also said it's "in full compliance with marketplace laws" in the 36 states that have passed them and the District of Columbia.