Court Opinion

ID: 9926328
Source: CourtListenerOpinion
Date Created: 2024-01-24 16:10:24.388786+00
Date Added: 2024-06-11T09:22:35.980470
License: Public Domain

THE STATE OF SOUTH CAROLINA
              In The Court of Appeals

Amazon Services, LLC, Appellant,

v.

South Carolina Department of Revenue, Respondent.

Appellate Case No. 2019-001706

         Appeal From The Administrative Law Court
     Ralph King Anderson, III, Administrative Law Judge

                     Opinion No. 6047
      Heard February 14, 2023 – Filed January 24, 2024

                       AFFIRMED

John C. Von Lehe, Jr. and Bryson Moore Geer, both of
Nelson Mullins Riley & Scarborough, LLP, of
Charleston; Neil H. Conrad and Robert N. Hochman,
both of Sidley Austin LLP, of Chicago, Illinois;
Constantine L. Trela, Jr., of Chicago, Illinois; and
Benjamin J. Razi, Sean Akins, and Carter G. Phillips, all
of Washington, D.C., all for Appellant.

Tracey Colton Green, Chad Nicholas Johnston, and John
William Roberts, all of Burr & Forman LLP, of
Columbia; Jason Phillip Luther, of the South Carolina
Department of Revenue, of Columbia; and Lauren
Acquaviva, of Viva Law Firm, of Charleston, all for
Respondent.
            Steve A. Matthews, of Haynsworth Sinkler Boyd, PA, of
            Columbia, for Amici Curiae Chamber of Commerce of
            the United States of America, Business Roundtable,
            Internet Association, South Carolina Chamber of
            Commerce, and Greater Columbia Chamber of
            Commerce.

            Joshua Madison Tyler Felder, of Parker Poe Adams &
            Bernstein LLP, of Greenville; and Kay L. Hobart, of
            Parker Poe Adams & Bernstein LLP, of Raleigh, North
            Carolina, for Amicus Curiae Council on State Taxation.

            Robert T. Bockman, of University of South Carolina
            School of Law, of Columbia, for Amici Curiae Tax Law
            Professors Tessa R. Davis and Clinton G. Wallace.

            M. Dawes Cooke, Jr., Justin P. Novak, and John William
            Fletcher, all of Barnwell Whaley Patterson & Helms,
            LLC, of Charleston; and R. Gregory Roberts, of Roberts
            Law Group, PLLC, of White Plains, New York; all for
            Amicus Curiae Institute for Professionals in Taxation.

            Edward Raymond Moore, III, of Murphy & Grantland,
            PA, of Columbia, and Alicia Pilar Mata, of Washington,
            D.C., both for Amicus Curiae Tax Executives Institute.

            Samantha K. Trencs, of Eversheds Sutherland (US) LLP,
            of Washington, D.C.; Eric S. Tresh, Maria M. Todorova,
            and Chris R. Lee, all of Eversheds Sutherland (US) LLP,
            of Atlanta, Georgia; all for Amicus Curiae The South
            Carolina Manufacturers Alliance.

            Jennifer Butler Routh, of McDermott Will & Emery, of
            Washington, D.C., for Amicus Curiae National Retail
            Federation.

VINSON, J.: In this contested case, Amazon Services, LLC (Amazon Services)
appeals the decision of the Administrative Law Court (ALC) affirming the South
Carolina Department of Revenue's (the Department's) determination assessing it
approximately $12.5 million in taxes, penalties, and interest for the period of
January 1, 2016, to March 31, 2016. Amazon Services argues that (1) as an online
marketplace operator, it owed no duty to collect and remit sales tax on products
sold on its marketplace by third parties under the Sales and Use Tax Act (the Act) 1
in effect during 2016; (2) the statute in effect in 2016 could reasonably be read not
to impose the obligation to collect and remit sales tax for third-party sales upon
online marketplace facilitators such that the statute is ambiguous and must be
construed against the Department; and (3) imposing a sales tax obligation on it for
third-party sales during the relevant period violates the United States and South
Carolina constitutional guarantees of fair notice and equal protection. We affirm.

BACKGROUND

Amazon Services, a subsidiary of Amazon.com, Inc. (Amazon), operates the
Amazon.com website (the Marketplace). Amazon Services is registered in South
Carolina as a retailer for the purposes of the Act. Amazon's business model
includes the retail sale of products through the Marketplace. There are three
primary sources of products listed for sale on the Marketplace: Amazon, Amazon
affiliates, 2 and third-party sellers.

In 2011, the legislature passed the Distribution Facility Sales Tax Exemption (the
Moratorium), primarily to encourage Amazon's investment in South Carolina. See
§ 12-36-2691. The Moratorium provided a sales tax exemption for the five-year
period from January 1, 2011, until December 31, 2015, for companies that built a
distribution facility in South Carolina, provided certain conditions were met. Id.
In 2011 and 2012, an Amazon subsidiary built two distribution facilities in South
Carolina. At the time, the dormant Commerce Clause of the United States
Constitution allowed the State of South Carolina to impose sales tax only upon
third-party sellers that had a physical presence in the state. See Nat'l Bellas Hess,
Inc. v. Dep't of Revenue of the State of Ill., 386 U.S. 753 (1967) (suggesting a
business was required to have a physical presence in the taxing state to form the
requisite nexus to the state); Quill Corp. v. North Dakota, 504 U.S. 298 (1992)
(requiring, pursuant to the dormant commerce clause, a physical presence for a

1
 S.C. Code Ann. §§ 12-36-5 to -2692 (2014 & Supp. 2023).
2
 Amazon affiliates that engage in retail sales include: AmazonFresh, LLC;
Fabric.com; Woot, Inc.; Zappos Retail, Inc.; 6pm.com, LLC; Amazon Web
Services, Inc.; Quidsi Retail, LLC; IMDb.com, Inc.; BOP, LLC, Amazon.com,
LLC; Warehouse Deals, LLC; and Amazon Digital Services, LLC.
business to have a substantial nexus with a taxing state such that it would be
subject to that state's sales and use tax). Thus, by building distribution facilities in
South Carolina, Amazon established the physical nexus required for the imposition
of sales tax.3 Upon expiration of the Moratorium, Amazon Services began
collecting and remitting sales tax for the retail sales of Amazon and its affiliates
rather than all of the sales occurring on the Marketplace.

The Department conducted an audit and assessed Amazon Services
$12,490,502.15 in taxes, penalties, and interest for the first quarter of 2016.
Amazon Services protested the proposed assessment. The Department issued a
determination, concluding Amazon Services was a "person in the business of
selling tangible personal property at retail, and the Department properly included
all the proceeds from [its] online sales in the tax base." Specifically, the
Department found Amazon Services owed sales and use tax in relation to the sale
of products by third-party sellers occurring on the Marketplace.4 Amazon Services
requested a contested case hearing before the ALC. The ALC held the contested
case hearing in February 2019, after which it issued an order affirming the
Department's determination.5 This appeal followed.

FACTS AND PROCEDURAL HISTORY

At the time of the contested case hearing, there were about 2.5 million third-party
sellers on the Marketplace. An Amazon Services' employee, Christopher Poad,
testified at the hearing and described Amazon's business model with respect to its
own retail sales and sales of products by third-party sellers. He explained any
third-party seller wishing to list its products for sale on the Marketplace must
create an account and agree to the terms of Amazon's Business Solutions
Agreement (the BSA). The BSA governs the relationship between Amazon
Services and the third-party sellers as well as Amazon subsidiaries, including

3
  In 2018, the United States Supreme Court decided South Dakota v. Wayfair, Inc.
and held a physical presence is no longer required to establish a substantial nexus
with the taxing state. 138 S. Ct. 2080, 2099 (2018).
4
  Amazon Services already collected and remitted sales tax on its sales and the
sales of Amazon affiliates; thus, sales tax on these transactions is not at issue.
5
  The ALC noted the Department issued the proposed assessment without
determining whether any merchants had already submitted sales tax for their sales
in South Carolina and the Department agreed it would be inappropriate to collect
sales tax for the same transaction from two different taxpayers.
Amazon Payments, Inc. and Amazon Fulfillment Services, Inc.6 Poad testified
Amazon Payments, Inc. provides payment processing services to third-party
sellers. Amazon Fulfillment Services, Inc. operates Amazon's warehouses and
provides optional fulfillment services to third-party sellers, referred to as
Fulfillment by Amazon, including storage, packaging, shipping, and delivery.

The BSA provides that Amazon Payments acts as the third-party seller's agent for
purposes of processing payments, receiving and holding sales proceeds on the
seller's behalf, remitting sales proceeds to the seller's bank account, charging the
seller's credit card, and paying Amazon and its affiliates amounts the seller owes
pursuant to the BSA and related services. The BSA states, "We will also receive
all Sales Proceeds on your behalf for each of these transactions and will have
exclusive rights to do so . . . ." The seller must agree "that buyers satisfy their
obligations to you for [y]our [t]ransactions when we receive the [s]ales
[p]roceeds." The BSA further provides the seller's sales proceeds will be held in
an account with Amazon Payments and that prior to disbursing the funds to the
seller, Amazon Payments may combine such proceeds with the funds of other
sellers, invest them, or use them for other legally permissible purposes. According
to the BSA, Amazon Services will "remit to [the seller] on a bi-weekly (14-day) (or
at our option, more frequent) basis . . . any sales proceeds received by us or our
Affiliates" less the fees the seller owes to Amazon Services. The BSA expressly
disclaims the existence of an agency relationship between the third-party sellers
and Amazon Services, except for Amazon Payments' role as a payment processing
agent. With regard to tax collection, the BSA requires third-party sellers to agree
to be responsible for the collection, reporting, and payment of all taxes. Amazon
Services will collect sales tax if a third-party seller chooses to pay for its tax
collection service, but this service is only available to professional sellers or
Amazon Webstore sellers—not individual sellers. However, even if a third-party
seller uses this tax collection service, Amazon Services collects the tax from the
customer and then remits those funds back to the third-party seller to pay to the
taxing authority.

Under the BSA, a seller may set any price it wishes for its product except that the
seller must offer the price that is at least as favorable to Amazon site users as any
price it offers such product through any other sales channel. In addition,
third-party sellers must pay Amazon Services fees to sell their products on the

6
  The BSA describes these entities as "affiliates," which it defines to mean "with
respect to any entity, any other entity that directly or indirectly controls, is
controlled by, or is under common control with that entity."
Marketplace. These fees include "Referral Fees," which are calculated based on
the sales price and Amazon's categorization of the type of product sold. These fees
range from six to forty-five percent, with a median fee of fifteen percent.

With regard to a third-party seller's communications with customers, the BSA
precludes third-party sellers from receiving or requesting payments directly from
customers and third-party sellers must agree to only use the tools and methods
Amazon Services provides to communicate with Amazon users regarding
transactions.

During the contested case hearing, the ALC admitted evidence of the Department's
sworn statements made in 2018 related to proposed "marketplace facilitator"
legislation "to the extent it might be probative." It concluded, however, the
evidence had little probative value because the Department's interpretation was not
entitled to deference and therefore there was no need to impeach its interpretation.
The ALC further ruled the Department's statements in the context of the proposed
legislation after the Department issued its determination did not render the Act
ambiguous because it was the ALC's province, rather than the Department's, to
interpret the law and determine whether the law was ambiguous.

The ALC concluded Amazon Services was in the business of selling tangible
personal property at retail for the purposes of the Act. It found Amazon Services
was not merely a conduit or intermediary but that its actions demonstrated it was in
the business of selling pursuant to section 12-36-910(A). The ALC determined
Amazon Services accepted consideration from customers because it initially
directly received consideration for the sale and transferred the remaining funds to
the seller after deducting its fees. The ALC further stated, Amazon Services'
compensation was, in part, directly tied to the amount of sales it could generate,
not for any one seller's products, but on the Marketplace as a whole. The ALC
concluded Amazon Services indirectly retains a share of the profits from each sale
through the Referral Fee. The ALC also found Amazon Services acted as
third-party sellers' agent with respect to the sale of the third-party sellers' goods,
regardless of whether a formal agency relationship was established. In addition,
the ALC found Amazon Services and third-party sellers had a "consignment-type"
relationship. The ALC further found the level of control Amazon Services
exercised over the Marketplace and the third-party transactions indicated it was in
the business of selling on the Marketplace. The ALC concluded that although
third-party sellers set their own pricing, Amazon Services benefited from the
parameters governing pricing because it received a profit from every sale through
its fees while also ensuring the offers listed on the Marketplace were the most
attractive offers, which encouraged more sales on the Marketplace.

Finally, the ALC determined no constitutional violations occurred. The ALC
concluded Amazon presented no evidence the Department imposed or attempted to
impose pending legislation on Amazon Services to obligate it to remit sales and
use tax for these transactions such that its actions violated the due process clause.
Rather, it concluded the Department applied the existing tax scheme to a relatively
new business model. The ALC rejected Amazon's argument that the Department's
actions violated its equal protection rights. The ALC found Amazon Services
failed to submit any evidence specifically identifying online marketplaces and
showing such other online marketplaces were similarly situated.

ISSUES ON APPEAL

I. Did the ALC err in concluding that, under the Act in effect in 2016, Amazon
Services owed a duty to collect and remit sales tax on products sold on the
Marketplace by third-party sellers?

II. Did the ALC err in concluding the statute in effect in 2016 could not
reasonably be read not to impose the obligation upon Amazon Services to collect
and remit sales tax for third-party sales such that the statute was ambiguous and
must be construed against the Department?

III. Did the ALC err in concluding that imposing a sales tax obligation on Amazon
Services for third-party sales during the relevant period did not violate
constitutional guarantees of fair notice or equal protection?

STANDARD OF REVIEW

When reviewing a final decision of the ALC,

             [This] court may not substitute its judgment for the
             judgment of the [ALC] as to the weight of the evidence
             on questions of fact. Th[is] court . . . may affirm the
             decision or remand the case for further proceedings; or, it
             may reverse or modify the decision if the substantive
             rights of the petitioner have been prejudiced because the
             finding, conclusion, or decision is:
               (a) in violation of constitutional or statutory provisions;

               (b) in excess of the statutory authority of the agency

               (c) made upon unlawful procedure;

               (d) affected by other error of law;

               (e) clearly erroneous in view of the reliable, probative,
               and substantial evidence on the whole record; or

               (f) arbitrary or capricious or characterized by abuse of
               discretion or clearly unwarranted exercise of discretion.

S.C. Code Ann. § 1-23-610(B) (Supp. 2023).

"Questions of statutory interpretation are questions of law, which [the appellate
c]ourt is free to decide without any deference to the [ALC]." Rent-A-Ctr. E., Inc.
v. S.C. Dep't of Revenue, 425 S.C. 582, 587, 824 S.E.2d 217, 219 (Ct. App. 2019)
(alterations in original) (quoting Duke Energy Corp. v. S.C. Dep't of Revenue, 415
S.C. 351, 355, 782 S.E.2d 590, 592 (2016)).

LAW AND ANALYSIS

I. Sales and Use Tax

Amazon Services argues that, under the law in effect in 2016, it was not the
"seller" of third-party products. Amazon Services argues the Travelscape7
decision does not support the ALC's conclusion because the website operator in
that case was a price-setter as opposed to a marketplace operator. Amazon
Services argues substantial evidence does not support the ALC's conclusion that it
was "in the business of selling" under section 12-36-910(A). It contends it is a
service provider and therefore not responsible for collecting and remitting sales
tax. Amazon Services further contends its interpretation of section 12-36-70 is
reasonable and therefore the ALC should have construed the statute in its favor
pursuant to the holding in Alltel Communications v. South Carolina Department of
Revenue, 399 S.C. 313, 731 S.E.2d 869 (2012). We disagree.

7
    Travelscape, LLC v. S.C. Dep't of Revenue, 391 S.C. 89, 705 S.E.2d 28 (2011).
We find the ALC did not err in determining Amazon Services was engaged in the
business of selling tangible personal property at retail and was therefore
responsible for collecting and remitting sales tax on sales of tangible personal
property owned by third parties occurring on the Marketplace.8

The Act provides, "A sales tax, equal to five percent of the gross proceeds of sales,
is imposed upon every person engaged or continuing within this State in the
business of selling tangible personal property at retail." § 12-36-910(A) (emphasis
added). "'Business' includes all activities, with the object of gain, profit, benefit, or
advantage, either direct or indirect." § 12-36-20 (emphasis added).

             "Retailer" and "seller" include every person:

             (1)(a) selling or auctioning tangible personal property
             whether owned by the person or others;

             ...

             (c) renting, leasing, or otherwise furnishing tangible
             personal property for a consideration;
             ...

             (2)(a) maintaining a place of business or qualifying to do
             business in this [s]tate; or

             (b) not maintaining an office or location in this [s]tate but
             soliciting business by direct or indirect representatives,
             manufacturers agents, distribution of catalogs, or other
             advertising matter or by any other means, and by reason
             thereof receives orders for tangible personal property or
             for storage, use, consumption, or distribution in this
             [s]tate.

             The [D]epartment, when necessary for the efficient
             administration of this chapter, may treat any salesman,
             representative, trucker, peddler, or canvasser as the agent
             of the dealer, distributor, supervisor, employer, or other

8
 Unless otherwise specified, our references to "the Act" refer to the version in
effect in 2016.
             person under whom they operate or from whom they
             obtain the tangible personal property sold by them,
             regardless of whether they are making sales on their own
             behalf or on behalf of the dealer, distributor, supervisor,
             employer, or other person. The [D]epartment may also
             treat the dealer, distributor, supervisor, employer, or
             other person as a retailer for purposes of this chapter.

§ 12-36-70 (emphasis added).

             "Sale" and "purchase" mean any transfer, exchange, or
             barter, conditional or otherwise, of tangible personal
             property for a consideration including:

             (1) a transaction in which possession of tangible personal
             property is transferred but the seller retains title as
             security for payment, including installment and credit
             sales;

             (2) a rental, lease, or other form of agreement;

             (3) a license to use or consume; and

             (4) a transfer of title or possession, or both.

§ 12-36-100.

First, we hold the statutes at issue were not ambiguous and therefore do not require
us to resolve any substantial doubt in Amazon Services' favor.

"The cardinal rule of statutory construction is to ascertain and effectuate the intent
of the legislature." Hodges v. Rainey, 341 S.C. 79, 85, 533 S.E.2d 578, 581
(2000); see also McClanahan v. Richland Cnty. Council, 350 S.C. 433, 438, 567
S.E.2d 240, 242 (2002) ("All rules of statutory construction are subservient to the
one that legislative intent must prevail if it can be reasonably discovered in the
language used, and that language must be construed in light of the intended
purpose of the statute."). "The usual rules of statutory construction apply to the
interpretation of tax statutes." Multi-Cinema, Ltd. v. S.C. Tax Comm'n, 292 S.C.
411, 413, 357 S.E.2d 6, 7 (1987). "[W]here the language relied upon to bring a
particular person within a tax law is ambiguous or is reasonably susceptible of an
interpretation that will exclude such person, then the person will be excluded, any
substantial doubt being resolved in his favor." Alltel Commc'ns, Inc., 399 S.C. at
321, 731 S.E.2d at 873 (quoting Cooper River Bridge, Inc. v. S.C. Tax Comm'n,
182 S.C. 72, 76, 188 S.E. 508, 509-10 (1936)). However, "[i]f a statute's language
is plain and unambiguous, and conveys a clear and definite meaning, there is no
occasion for employing rules of statutory interpretation and the court has no right
to look for or impose another meaning." Paschal v. State Election Comm'n, 317
S.C. 434, 436, 454 S.E.2d 890, 892 (1995).

In Alltel, our supreme court found the term "telephone company" was ambiguous
because it was not defined in the statute. Alltel Commc'ns, Inc., 399 S.C. at 316,
321, 731 S.E.2d at 870, 873. Here, however, the relevant terms—"seller,"
"business," and "sale"—are terms defined in the statute and we find there is no
substantial doubt the definitions provided in the Act capture Amazon Services'
activities. We therefore conclude the Act was not ambiguous. See Rent-A-Ctr. E.,
Inc., 425 S.C. at 589, 824 S.E.2d at 221 (holding section 12-36-910(A) was
unambiguous and therefore the ALC "was in no position to apply rules of statutory
interpretation" and did not err in failing to construe it in the taxpayers' favor).
Thus, there is no ambiguity to resolve in Amazon Services' favor.

Amazon Services further asserts the Department "told the legislature via sworn
testimony that there was doubt that the statute could be applied to online
marketplace facilitators like Amazon Services," and that the legislature specifically
amended the statute in 2019 "to provide the clarity that the Department admitted
was missing." Amazon Services argues this testimony confirmed the statute
needed to be changed to impose sales tax obligations upon marketplace facilitators
and demonstrated the reasonableness of Amazon Services' interpretation. Amazon
Services argues this showed the Act was ambiguous and should therefore be
construed in its favor. We disagree.

"When the Legislature adopts an amendment to a statute, this [c]ourt recognizes a
presumption that the Legislature intended to change the existing law. Nonetheless,
a subsequent statutory amendment may also be interpreted as clarifying original
legislative intent." Duvall v. S.C. Budget & Control Bd., 377 S.C. 36, 46, 659
S.E.2d 125, 130 (2008) (citation omitted).

             We recognize the rule of construction that the adoption of
             an amendment which materially changes the terminology
             of a statute under some circumstances indicates
             persuasively and raises a presumption that a departure
             from the original law was intended. However, like all
             rules of construction, the presumption is merely an aid in
             interpreting an ambiguous statute and determining the
             legislative intent.

N. River Ins. Co. v. Gibson, 244 S.C. 393, 398, 137 S.E.2d 264, 266 (1964).

We acknowledge the General Assembly amended the Act in 2019 to expressly
include marketplace facilitators. See Act No. 21, 2019 S.C. Acts 101-02. It was
titled:

             An act to amend the code of laws of South Carolina,
             1976, by adding section 12-36-71 so as to define
             "marketplace facilitator"; to amend sections 12-36-70,
             12-36-90, and 12-36-130, all relating to sales tax
             definitions, so as to further inform marketplace
             facilitators of their requirements; and to amend section
             12-36-1340, relating to the collection of sales tax by
             retailers, so as to further inform marketplace facilitators
             of their requirements.

Id. However, as we stated, we hold the Act is unambiguous and therefore we need
not "look for or impose another meaning" beyond the plain language of the Act.
See Paschal, 317 S.C. at 437, 454 S.E.2d at 892. Further, the 2019 act contained
prefatory language stating it "shall not be construed as a statement concerning the
applicability of the [Act] to any sales and use tax liability in matters currently in
litigation or being audited." Act No. 21, 2019 S.C. Acts 102. Thus, we need not
consider either the Department's statements made in the context of the proposed
amendments to the Act or the amendments themselves in deciding this issue. See
N. River Ins. Co., 244 S.C. at 398, 137 S.E.2d at 266 (opining that the presumption
that the adoption of an amendment that materially changes the terminology of a
statute means a departure from the original law was intended "is merely an aid in
interpreting an ambiguous statute and determining the legislative intent"). Instead,
we consider the language of the Act as it existed in 2016. Regardless, the use of
the words "further inform" in the title of the 2019 act to amend the Act indicates
the Act already encompassed persons with business models like those of Amazon
Services. Based on the foregoing, we hold the statutes at issue were not
ambiguous and therefore there is no substantial doubt that would require resolution
in Amazon Services' favor.
As to Amazon Services' contention the ALC stated the Act was not clear, we hold
the ALC was not bound by this statement because the ALC made this observation
during the hearing but made no such finding in the written order. See Ford v. State
Ethics Comm'n, 344 S.C. 642, 646, 545 S.E.2d 821, 823 (2001) ("Until written and
entered, the trial judge retains discretion to change his mind and amend his oral
ruling accordingly. The written order is the trial judge's final order and as such
constitutes the final judgment of the court." (citation omitted)).

Next, we find the evidence supports the ALC's finding that Amazon Services was
engaged in the business of selling tangible personal property at retail and was
therefore responsible for collecting and remitting sales tax on such transactions
pursuant to section 12-36-910(A).

As an initial matter, Amazon Services argues that it and Amazon Payments are
separate entities and the actions of Amazon Payments are not attributable to
Amazon Services. It asserts that when a customer purchases a product from a
third-party seller, Amazon Payments—not Amazon Services—receives the sales
proceeds and then remits those funds to the third-party seller. It contends the ALC
incorrectly attributed Amazon Payments' actions to Amazon Services with no
justification for "piercing the corporate veil." We reject this form-over-substance
argument. See Frank Lyon Co. v. United States, 435 U.S. 561, 573 (1978) ("In the
field of taxation, administrators of the laws and the courts are concerned with
substance and realities, and formal written documents are not rigidly binding."
(quoting Helvering v. Lazarus & Co., 308 U.S. 252, 255 (1939))); see also Scripto,
Inc. v. Carson, 362 U.S. 207, 211 (1960) (setting aside the formal structure of the
contractual arrangements of the company and holding "[t]o permit such formal
'contractual shifts' to make a constitutional difference would open the gates to a
stampede of tax avoidance"). In addition, the Act provides "any group or
combination acting as a unit" is a "person" within the meaning of the Act. See
§ 12-36-30. Even the BSA treats these entities as the same because it refers to
Amazon Services and Amazon Payments as "we." Thus, we find the ALC did not
err in treating the actions of Amazon Payments as the actions of Amazon Services.

Both parties argue Travelscape should be read in their favor. We find Travelscape
provides only limited guidance. There, the operator of Expedia.com (Travelscape)
negotiated a rate for hotel rooms with hotels, offered those hotel reservations to
customers for booking on Expedia.com, and charged the customer's credit card for
the transaction. 391 S.C. at 95, 705 S.E.2d at 31. After the customer checked out
of the hotel, the hotel invoiced Travelscape for the net room rate and sales tax
owed by the hotel. Id. Travelscape would then remit the net room rate and tax
recovery charge to the hotel but retained facilitation and service fees. Id. at 95-96,
705 S.E.2d at 31. Travelscape did not pay sales tax on these fees. Id. at 96, 705
S.E.2d at 31. Our supreme court rejected Travelscape's argument that it was not
"in the business of furnishing accommodations" within the meaning of section
12-36-920(E) because it did not own or operate hotels. Id. at 99, 705 S.E.2d at 33.
Travelscape argued it was "only an intermediary providing hotel reservations to
transients and d[id] not physically provide sleeping accommodations." Id. Our
supreme court, however, concluded the definition of "furnish" encompassed "the
activities of entities such as Travelscape who, whether directly or indirectly,
provide hotel reservations to transients for consideration." Id. at 101, 705 S.E.2d at
34. The import of the Travelscape decision with respect to this case is that our
supreme court interpreted section 12-36-920(E) of the Act broadly. We likewise
interpret section 12-36-910(A) broadly.

Because section 12-36-20 itself defines "business" broadly, we hold the record
shows Amazon Services' activities in connection with third-party sales on the
Marketplace were with the object of achieving a profit or advantage. See
§ 12-36-20 ("'Business' includes all activities, with the object of gain, profit,
benefit, or advantage, either direct or indirect." (emphasis added)). Specifically,
Amazon Services' agreement with third parties required the third-party sellers to
pay a per-item fee—the Referral Fee—based upon a percentage of the item's sales
price and the category of the item sold. This is a profit from the third-party seller's
sale of the item. See id. The restrictions and requirements placed upon third-party
sellers in the Marketplace give Amazon Services an advantage over other sales
channels. See id. For instance, the fact a third-party seller must offer its items at a
price at least as low as it offers such item through any other sales channel is
designed to ensure the buyer purchases the item from the Marketplace, thus giving
Amazon Services an indirect advantage over the other sales channels.

Next, we hold Amazon Services is a seller within the meaning of section 12-36-70.
Amazon Services is the only party a buyer encounters during the sales transaction.
The buyer receives a confirmation from Amazon and Amazon conducts the
transaction. Amazon Services, through Amazon Payments, processes the
transaction, holds the funds, and remits those funds (less its fees) to the seller.
Amazon Services, through Amazon Payments, has control over these funds until
they are remitted to the third-party seller on a biweekly basis. The BSA provides
that Amazon Payments may invest the funds and the third-party seller is not
entitled to any interest. Although the items sold may be owned by the third-party,
section 12-36-70 does not require the seller own the goods sold. We find the
foregoing demonstrates Amazon Services is a seller under section 12-36-70.
Further, we find these transactions constitute sales as defined by 12-36-100
because Amazon Services receives payment in exchange for the items even if the
items are not in its physical possession. Regardless of whether Amazon Services
has title or possession of the items, it requires the third-party seller to send the
items to the purchaser or refund the sale if it does not do so. Thus, Amazon
Services effects the transfer of the goods and receives consideration. Although it
remits the proceeds to the third-party seller, it retains the fees that the third-party
seller is responsible for paying to it for the transaction, including the Referral Fee
based upon the price of the item. Accordingly, we hold the definition of sale in
section 12-36-100 encompasses these transactions.9

We reject Amazon Services' argument that it is merely a service provider. The
parties do not dispute that customers making purchases on the Marketplace are
buying goods, not services. Thus, we hold substantial evidence supports the ALC's
finding Amazon Services is a service provider only with respect to its relationship
to the third-party seller. See Boggero v. S.C. Dep't of Revenue, 414 S.C. 277, 285,
777 S.E.2d 842, 846 (Ct. App. 2015) ("[T]he analysis under the true object test
focuses on factual questions; namely, whether the customer's purpose for entering
the transaction was to procure a good or a service.").

Amazon Services further argues the ALC lacked a legal basis for applying the
novel concept of a "point of sale" and argues the ALC erred by finding it had a
"consignment-type" relationship with the third-party sellers. It asserts its
relationship does not function like a consignment relationship because it does not
control the inventory, decide what to sell, or set the price. The ALC analogized the
sales at issue here to consignment sales. The ALC additionally found Amazon
Services accepts customer payments at the point of sale—i.e., at the time the
customer purchases the product—for all transactions on the Marketplace.
Consideration of these concepts, although illustrative, is not necessary in
determining whether Amazon Services was in the business of selling within the
meaning of the Act. We find the ALC considered these concepts for purposes of

9
  We note that, as the ALC observed, because Amazon Services exercises control
over the transaction, third-party sellers do not have the opportunity to collect sales
tax when the transaction occurs; therefore, without Amazon Services collecting the
tax, it is unlikely it would ever be collected. This would not effectuate the
legislative intent of the Act. See Hodges, 341 S.C. at 85, 533 S.E.2d at 581 ("The
cardinal rule of statutory construction is to ascertain and effectuate the intent of the
legislature.").
illustrating the practical aspects of sales occurring on the Marketplace in applying
the facts of this case to the Act. We therefore conclude the ALC's application of
these concepts does not require reversal. See Cox v. Cox, 290 S.C. 245, 248, 349
S.E.2d 92, 93-94 (Ct. App. 1986) (holding the burden is on the appellant to show
the trial court committed reversible error).

Amazon Services additionally argues that in South Carolina Revenue Ruling
18-14, 10 the Department took the position that third-party sellers were the sellers of
the products they sold in an online marketplace for purposes of calculating a
remote seller's "gross revenue" from sales in South Carolina to determine if the
requisite nexus required under Wayfair existed. Amazon Services asserts this
interpretation demonstrates the reasonableness of its own interpretation of the
statute. We find this argument is unpreserved because the ALC did not address
this argument in its final order and Amazon Services did not seek reconsideration
of this issue. See Brown v. S.C. Dep't of Health & Env't Control, 348 S.C. 507,
519, 560 S.E.2d 410, 417 (2002) ("[I]ssues not raised to and ruled on by the AL[C]
are not preserved for appellate consideration."); Home Med. Sys., Inc. v. S.C. Dep't
of Revenue, 382 S.C. 556, 560-63, 677 S.E.2d 582, 584-86 (2009) (holding rule
59(e), SCRCP, motions to reconsider are permitted in ALC proceedings and often
required for issue preservation purposes). Regardless, Revenue Ruling 18-14
states,

             [U]nder South Carolina sales and use tax law, the sales
             made via [a] marketplace are sales by the marketplace,
             and the marketplace is required to . . . remit the sales and
             use tax on the marketplace's 'gross proceeds of sales,'[11]
             which [would] include[] the . . . sales of products owned
             by [a] remote seller but sold by the marketplace.

In other words, the ruling treats online marketplaces as sellers in accordance with
section 12-36-70 and states they are required to collect and remit sale and use tax
under the Act. Therefore, Revenue Ruling 18-14 does not support Amazon
Services' position.

10
   S.C. Dep't of Revenue, S.C. Rev. Rul. 18-14, Retailers without a Physical
Presence ("Remote Sellers") - Economic Nexus (2018), 2018 WL 4944851 (stating
the Department's position regarding remote sellers in accordance with Wayfair, 138
S. Ct. at 2099, and section 12-36-70).
11
   § 12-36-90 (defining gross proceeds generally as "the value proceeding or
accruing from the sale, lease, or rental of tangible personal property").
Finally, we are not persuaded by Amazon Services' reference to the tax laws of
other jurisdictions. Citing to laws that were passed between 2017 and 2019 in
other states, Amazon Services contends that as of June 2020, thirty-six other states
had passed "marketplace facilitator" laws and none of these states concluded a
marketplace facilitator was liable for sales tax on third-party sales prior to the
enactment of such laws. Amazon Services has failed to identify, which, if any, of
these states had statutes substantially similar to sections 12-36-20, 12-36-70, and
12-36-910(A) in effect prior to the enactment of the marketplace facilitator laws.
In its reply brief, Amazon Services cited to Normand v. Wal-Mart.com USA, LLC,
2019-00263 (La. 1/29/20), 340 So. 3d 615, which was not decided until after it
filed its initial brief. In Normand, the Louisiana Supreme Court held the trial court
erred by concluding the online marketplace was a "dealer" such that it was required
to collect and remit sales tax under Louisiana law. Id. at pp. 19-26, 340 So. 3d at
627-32. We find Normand distinguishable because the statutes at issue there do
not contain the same language as the statutes at issue here. Compare La. Stat. Ann.
§ 47:301(4)(b) ("'Dealer' includes every person who manufactures or produces
tangible personal property for sale at retail, for use, or consumption, or
distribution, or for storage to be used or consumed in a taxing jurisdiction. 'Dealer'
is further defined to mean: . . . (b) Every person who sells at retail, or who offers
for sale at retail, or who has in his possession for sale at retail, or for use, or
consumption, or distribution, or storage to be used or consumed in the taxing
jurisdiction, tangible personal property as defined herein."), with § 12-36-910(A)
(2014) ("A sales tax, equal to five percent of the gross proceeds of sales, is
imposed upon every person engaged . . . in the business of selling tangible personal
property at retail." (emphasis added)), § 12-36-20 ("'Business' includes all
activities, with the object of gain, profit, benefit, or advantage, either direct or
indirect." (emphasis added)), and § 12-36-70(1)(a) (providing a "seller" includes
every person "selling or auctioning tangible personal property whether owned by
the person or others" (emphasis added)).

Based on the foregoing, we hold Amazon Services is a person engaged in the
business of selling tangible personal property at retail with respect to sales
occurring on the Marketplace and is therefore required to collect and remit sales
tax on such sales. We further hold Amazon Services is a seller within the meaning
of section 12-26-70 with respect to third-party sales on the Marketplace and that
such transactions constitute sales under section 12-36-100. Accordingly, we affirm
the ruling of the ALC.

II. Constitutional Violations
Amazon Services argues the Department's attempt to collect sales taxes from
Amazon Services for third-party sales during the first quarter of 2016 violates the
South Carolina and federal constitutional guarantees of due process. Citing to
FCC. v. Fox Television Stations, Inc., 567 U.S. 239 (2012), it argues the
Department's assessment was an attempt to retroactively apply the 2019
amendments to Amazon Services and thus violated the constitutional requirement
of fair notice. Amazon Services next asserts that applying the 2019 amendments
only to Amazon Services violated the constitutional guarantee of equal protection.
It contends the Department singled out Amazon Services for retroactive
enforcement of its interpretation. Amazon Services argues the Department's
director admitted to the General Assembly that the current lawsuit would "pull up
some retroactivity." Amazon Services argues the director testified that only
Amazon Services had been forced to collect sales taxes on third-party sales before
the 2019 amendment took effect. Amazon Services contends "[t]he Department
had not attempted to collect sales tax from [it] or any other marketplace facilitator
for third-party sales during the more than [fifteen]-year period that Amazon
Services had been operating its marketplace." We disagree.

"A fundamental principle in our legal system is that laws which regulate persons or
entities must give fair notice of conduct that is forbidden or required." Fox
Television Stations, Inc., 567 U.S. at 253. "This requirement of clarity in
regulation is essential to the protections provided by the Due Process Clause of the
Fifth Amendment." Id.; see also U.S. Const. amend. V ("No person shall
be . . . deprived of life, liberty, or property, without due process of law . . . ."). "It
requires the invalidation of laws that are impermissibly vague." Fox Television
Stations, Inc., 567 U.S. at 253. "[T]he void for vagueness doctrine addresses at
least two . . . due process concerns: first, that regulated parties should know what is
required of them so they may act accordingly; second, precision and guidance are
necessary so that those enforcing the law do not act in an arbitrary or
discriminatory way." Id.

We conclude the ALC did not err by finding Amazon Services has failed to show
any constitutional violations. First, we find Fox Television Stations is inapplicable.
There, the United States Supreme Court rejected the Federal Communications
Commission's (the FCC's) attempt to retroactively apply a change in policy to two
television stations for airing content that would have been permissible under the
former policy. Id. at 249-55. Prior to issuing the determinations at issue in that
case, the FCC had issued a ruling in 2004 in which it changed a preexisting
indecency enforcement policy regarding the use of fleeting expletives. Id. at 248.
The prior policy distinguished between isolated and repeated broadcasts of
indecent material and determined that as to the use of expletives, "deliberate and
repetitive use in a patently offensive manner is a requisite to a finding of
indecency." Id. at 246 (quoting In the Matter of Pacifica Found., Inc. d/b/a
Pacifica Radio L.A., Cal. of Kpfk-Fm L.A., Cal., 2 F.C.C. Rcd. 2698 (1987)). In
the ruling changing the policy, the FCC stated "the mere fact that specific words or
phrases are not sustained or repeated does not mandate a finding that material that
is otherwise patently offensive to the broadcast medium is not indecent." Id. at
248. In addition, the FCC had released prior decisions that declined to find
isolated and brief moments of nudity actionably indecent. Id. at 257. Given the
FCC's prior decisions pertaining to brief nudity, the Court found the FCC "c[ould]
point to nothing that would have given [the station] affirmative notice that its
broadcast [of a brief shot of nude buttocks] would be considered actionably
indecent." Id. Even though the broadcasts at issue took place in 2002 and 2003—
prior to the 2004 ruling—the FCC applied the indecency policy established in the
2004 ruling to the earlier broadcasts and found the stations violated the policy by
broadcasting fleeting expletives and nudity. Id. at 249. In vacating these
determinations, the Supreme Court found, "The [FCC] failed to give [the stations]
fair notice prior to the broadcasts in question that fleeting expletives and
momentary nudity could be found actionably indecent." Id. at 258. Here,
however, no evidence shows the Department attempted to retroactively apply the
new law or policies to Amazon Services' conduct. Rather, the Department applied
the sales tax law that was in place at the time. Thus, we find the ALC did not err
in finding Amazon Services failed to show the Department violated the
constitutional requirement of fair notice.

Amazon Services' argument the Department had not attempted to collect sales tax
from it prior to 2016 is technically correct, but it ignores the context of the
Department's actions. First, prior to the 2018 Wayfair decision, the Department
could not lawfully collect sales tax from a seller that had no physical presence in
this state. See Wayfair, Inc., 138 S. Ct. at 2099 (holding a physical presence is no
longer required to establish a substantial nexus with the taxing state); see also Quill
Corp., 504 U.S. at 309-18 (requiring a physical presence for a business to have a
substantial nexus with a taxing state). Therefore, until Amazon Services
established a physical presence in this state by opening its distribution centers, it
was not subject to the Act. However, when it established such presence, the
Moratorium ensured the Department would not collect any sales tax from it until
the Moratorium expired. See § 12-36-2691(D)(1) (providing the Moratorium
would cease to apply as of January 1, 2016). Once the Moratorium expired, the
Department could—and did—impose sales tax upon Amazon Services' sales
occurring on the Marketplace. This was not an attempt to retroactively apply
subsequent legislation to Amazon Services' actions. Rather, the Department
applied the law that was in place at the time to Amazon Services' sales. The fact
the legislature later modified the law to specifically include marketplace
facilitators does not establish the Act failed to provide fair notice to Amazon
Services that third-party sales occurring on the Marketplace would be subject to
sales tax. Further, any statements the Department's director made in 2018 during
hearings before the legislature are irrelevant to the Department's 2016 audit and
our consideration of the law as it existed at the time of such audit. See Captain's
Quarters Motor Inn, Inc. v. S.C. Coastal Council, 306 S.C. 488, 490, 413 S.E.2d
13, 14 (1991) ("As a creature of statute, a regulatory body is possessed of only
those powers expressly conferred or necessarily implied for it to effectively fulfill
the duties with which it is charged."); Bazzle v. Huff, 319 S.C. 443, 445, 462
S.E.2d 273, 274 (1995) ("An administrative agency has only such powers as have
been conferred by law and must act within the authority granted for that purpose.").
Accordingly, we reject this argument.

Further, we find Amazon Services has failed to show an equal protection violation.
"The South Carolina Constitution provides that no 'person shall be denied the equal
protection of the laws.'" Bodman v. State, 403 S.C. 60, 69, 742 S.E.2d 363, 367
(2013) (quoting S.C. Const. art. I, § 3); see also U.S. Const. amend. XIV, § 1 ("No
State shall . . . deprive any person of life, liberty, or property, without due process
of law; nor deny to any person within its jurisdiction the equal protection of the
laws."). "[T]o establish an equal protection violation, a party must show that
similarly situated persons received disparate treatment." TNS Mills, Inc. v. S.C.
Dep't of Revenue, 331 S.C. 611, 626, 503 S.E.2d 471, 479 (1998). "Where an
alleged equal protection violation does not implicate a suspect class or abridge a
fundamental right, the rational basis test is used." Town of Hollywood v. Floyd,
403 S.C. 466, 480, 744 S.E.2d 161, 168 (2013). "To prevail under the rational
basis standard, a claimant must show similarly situated persons received disparate
treatment, and that the disparate treatment did not bear a rational relationship to a
legitimate government purpose." Id. Amazon Services failed to present any
evidence specifically identifying other online marketplaces and showing such
marketplaces were similarly situated persons. Further, Amazon Services failed to
present any evidence that any such similarly situated persons received disparate
treatment. Thus, we find Amazon Services failed to show an equal protection
violation. Based on the foregoing, we find the ALC did not err in concluding
Amazon Services failed to show any constitutional violations on behalf of the
Department.
CONCLUSION

For the foregoing reasons, the ALC's order is

AFFIRMED.

KONDUROS, J., and LOCKEMY, A.J., concur.