Supreme Court Rules States Can Levy Tax On Internet Sales; E-Commerce Stocks Sell Off

The markets sold off sharply Thursday after the U.S. Supreme Court ruled that states could impose sales taxes on out-of-state online retailers.

Why It’s Important

The decision on South Dakota v. Wayfair, a win for President Donald Trump, was not entirely expected. In April, the Supreme Court appeared to lean in favor of the precedent exempting internet retailers without physical in-state presence from collecting taxes in relevant territories.

Some read the shift as a negative for e-markets, which may need to raise prices or take margin hits if states opt to embrace taxes.

• Amazon.com, Inc. AMZN fell 1.4 percent;
• Overstock.com Inc OSTK 2.9 percent;
• Wayfair Inc W 4.5 percent;
• Etsy Inc ETSY fell 4.8 percent;
• eBay Inc EBAY fell 1.8 percent; and
• Paypal Holdings PYPL fell about 1 percent.

However, one recent analysis suggested Amazon and 19 of the nation’s other top 20 e-retailers will not be affected by the change, as they are already required to remit sales tax. Instead, smaller businesses will be “devastated.”

As shops continue shifting to embrace the e-commerce culture, the law could be widely felt.

What’s Next

Only online business in South Dakota will see immediate impact, but the case creates a channel for other states to enact their own taxation laws.

At time of publication, the aforementioned stocks were slightly rebounding from their initial drops.

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