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Do Online Retailers like Amazon Have to Pay State Retail Taxes? South Carolina says 'Yes!'

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This past June the Palmetto State went ahead and filed a court complaint via an electronic signature service alleging that the online retail giant was failing, and had failed, to collect sales tax from 3rd party vendors on their marketplace platform. This included all merchandise not sold directly by Amazon but sold by another party through their cyber auspices. Amazon also handles payment processing for each transaction and automatic customer support for these 3rd party merchant. And South Carolina wants a cut from each transaction that comes from or goes to their state.

South Carolina is making the claim that Amazon now owes them the substantial amount of twelve-point-five million dollars for the first quarter of last year -- this includes the tax amount itself, plus penalty and interest. The audit that came up with that fantastic figure originated with the S.C. Department of Revenue, but they are keeping mum as to who instigated the audit or why they have not issued any further audits for other sales quarters for Amazon or any other ecommerce company doing business in South Carolina.

Amazon has a complicated history of issues related to internet taxation in the United States. They have already had to pay substantial penalties to the European Union for alleged back taxes, and now it appears as if the same thing is happening in the United States. If South Carolina succeeds in making their accusations stick and the giant e-tailer has to cough up the funds, it could set a budget-busting precedent that other states will be only too glad to follow. Amazon, and other e-tailers that do business in the state, would take a blow to their bottom line that would not be easy to reconcile with their boards of directors or with their customers when prices are raised. Amazon and other e-tailers now enjoy a significant advantage over brick and mortar retailers, government authorities say, by bypassing the collection of state sales tax.

Amazon CEO Jeff Bezos insists that South Carolina’s claims for back sales tax is “without merit.” He has vowed that Amazon will fight the charges with all the strength it can muster.

Despite claims by President Trump and others on Twitter and other social media platforms, it is a documented fact that Amazon does collect and pay sales tax on its own products in every state that now requires it. This is usually dictated by whether or not the company has a ‘nexus’ -- a warehouse or office -- in the state in question. Currently, Amazon has three physical warehouses in the state of South Carolina.

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