The judge who presided over South Carolina's tax-collection victory over Amazon.com didn't have to plow much new ground in navigating the legal thicket.
He helped blaze that trail more than a decade ago in a case involving another industry disrupter.
Over and over in his 54-page ruling — 94 times to be exact — S.C. Administrative Law Court Judge Ralph King Anderson III cited a high-profile skirmish known as "Travelscape" that would put many online middlemen on notice about their tax-collection practices.
It was a bullish beginning for South Carolina's newest automobile plant — a one-shot order for 20,000 vehicles, straight out of the chute.
Amazon came out on the losing end Monday, some seven months after arguing its case in a Columbia courtroom. Anderson last week upheld a decision by the S.C. Department of Revenue that the retail giant owes sales tax on items that independent merchants posted on the company's online "Marketplace" in early 2016. The exact amount Amazon owes the state will be determined later.
At issue was whether the company was required to collect and remit sales taxes during that period.
In one corner was the Department of Revenue. The agency was aiming to recoup nearly $12.5 million in back taxes, including interest and penalties, based on an audit of Amazon's South Carolina sales during the first quarter of 2016.
In the other was Jeff Bezos and his seemingly unstoppable e-commerce empire. Amazon countered that it wasn't responsible for collecting or paying the taxes because it wasn't the merchandise owner, that its role was limited to providing a sales platform and support services, such as deliveries and payment processing.
Anderson slowly picked that argument apart, starting with the terms in the "business solutions agreement" that vendors must sign before they can promote their wares on Marketplace. For example, third-party merchandisers can’t accept money directly from buyers, and they can’t communicate with customers without approval. Also, Amazon insists on handling all refunds.
On their own, those restrictions don't make the Seattle-based company a "seller," but together they reflect its "extensive control over transactions on the Marketplace," Anderson wrote.
He then turned to the precedent that the S.C. Supreme Court set in deciding the Travelscape case in early 2011, saying the circumstances are "highly relevant."
"Comparatively, the factual positions of Travelscape and Amazon ... are very similar," he wrote,
Travelscape was a subsidiary of Expedia.com. The Department of Revenue audited the Las Vegas company's South Carolina online hotel bookings from 2001-2006 and demanded more than $6.2 million in unpaid accommodations taxes. The travel site challenged the bill, saying, in part, that it was merely an "intermediary" that provided a reservation platform but did not own or furnish any rooms.
The case made its way before none other than Judge Anderson, who told Travelscape in 2009 to pay up. The company took its appeal to the S.C. Supreme Court. Travelscape lost in a January 2011 decision that sent a chill across the entire e-commerce landscape.
"I would be concerned, very concerned, if I was an internet company that went into a state and didn’t collect tax revenue,” an attorney from the company's hometown told a Las Vegas newspaper shortly afterward.
Nearly nine years on, Anderson has stuck to his guns. In deciding this latest case, he disagreed with Amazon's assertion that it acts as a "'conduit' for money exchanged between customers and merchants." The judge circled back to the terms of its iron-clad vendor agreements and grip it maintains on the sales process.
"Overall, I find Amazon ... is 'engaged in the business of selling,'" Anderson wrote.
While the company hasn't decided whether to challenge the decision, the debate over how to tax internet transactions is fading in South Carolina. Out-of-state businesses that ring up more than $100,000 in online sales are responsible for collecting and remitting under a law that took effect in November. The legislation was expanded in April to include “marketplace facilitators” such as Amazon and eBay.
Amazon said last week that it fully supports the changes "because they provide essential fairness for all sellers and marketplaces, more revenue for states and a simplified administration of the sales tax.”
South Carolina likes them, too. On average, the new ground rules are producing an extra $5.9 million a month in state tax revenue.