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South Carolina DOR Seeks Feedback on Draft Marketplace Guidance

Posted on July 25, 2019

The South Carolina Department of Revenue is seeking feedback on draft guidance for marketplace facilitators and their third-party sellers.

The DOR on July 23 issued a draft revenue ruling in response to a recently enacted marketplace facilitator law (S. 214, Act 21) designed to reinforce and clarify sales tax collection requirements for marketplace facilitators.

The proposed revenue ruling would be effective retroactive to April 26, to coincide with the bill's effective date. Public comments on the guidance are due by August 13.

The draft guidance comes amid the state’s litigation with Amazon Services LLC over the retailer’s sales and use tax collection obligations in South Carolina. The suit involves a $12.5 million assessment issued by the DOR for uncollected taxes on sales made by third-party vendors over Amazon’s website during the first quarter of 2016. A decision in the case is expected any day now.

Under the draft revenue ruling, marketplace facilitators are considered retailers and are responsible for remitting state and local sales and use taxes for all products sold via their marketplace — defined as physical or electronic, including but not limited to “any space, store, booth, catalog, website, television or radio broadcast, or similar place, medium, or forum.”

The draft guidance explains that a marketplace facilitator is “any person engaged in the business of facilitating a retail sale of tangible personal property by: listing or advertising, or allowing the listing or advertising of, the products of another person in any marketplace where sales at retail occur and collecting or processing payments from the purchaser, either directly or indirectly through an agreement or arrangement with a third party.”

Also included in the definition are “any related entities assisting the marketplace facilitator in sales, storage, distribution, payment collection, or in any other manner, with respect to the marketplace.”

Brick-and-mortar retailers with or without an online presence; online-only retailers; and online food ordering, payment, and delivery retailers are listed as examples of marketplace facilitators.

The draft guidance explains that marketplace facilitators “must comply with all sales and use tax obligations under South Carolina’s sales and use tax law for a retailer,” including obtaining a retail license, filing a return, and remitting the proper sales tax on third-party sales.

Marketplace sellers whose products are sold only through a marketplace would not be required to obtain the retail license or remit tax on their sales. However, if a third-party seller sells some products through its own website or a retail store, it would be subject to the state's licensing and tax collection and remittance requirements.

Marketplace facilitators without a physical presence in South Carolina have economic nexus with the state if their gross revenue from sales of tangible personal property, products transferred electronically, and services delivered into the state is more than $100,000 in the previous or the current calendar year.  

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