The primary issue presented in the appeal is whether the South Carolina Department of Revenue may impose a sales tax collection responsibility on Amazon for sales made on Amazon.com by independent third parties prior to specific legislative authorization for that responsibility. 

On behalf of COST, Kay and Madison argue that the department’s unilateral expansion of this burden exceeds the department’s statutory authority and is contrary to legislative intent. In recent legislation, the South Carolina General Assembly addressed the taxation of “marketplace facilitators” like Amazon for the first time. Although it authorized the taxation of Amazon on third party sales, it did so only prospectively. Notably, South Carolina is the only state in the country that has sought to retroactively apply marketplace facilitator legislation.     

In the lower court proceeding, the South Carolina Administrative Law Court held that Amazon – which collects payments from customers who buy products sold by independent third party sellers on the Amazon marketplace – must collect and remit tax on those sales. Despite the prospective nature of the legislation, the court ruled this responsibility extends to periods prior to the new law authorizing the taxation of Amazon on those sales. 

The amicus brief argues the imposition of a new tax collection responsibility prior to the effective date of the legislation is not statutorily authorized and should be reversed. The brief further argues that the imposition of tax in the absence of legislation contradicts two fundamental principles of good tax administration: notice and fairness. 

The case has the potential to be a test case on the retroactive imposition of sales tax collection responsibilities in light of the landmark decision of the United States Supreme Court in South Dakota v. Wayfair. In that case, the court expressed significant concern over states responding to its ruling by retroactively applying sales tax liability.