The Supreme Court just overturned a 1992 ruling (which had limited online tax collections), thus freeing states and local governments to start collecting billions of dollars in sales taxes from internet retailers that don’t currently charge tax to their customers.
Specifically, SCOTUS upheld a law passed by South Dakota lawmakers in 2016 that requires out-of-state online sellers to collect the state’s sales taxes if the companies have more than $100,000 in annual sales of products to South Dakota residents or more than 200 separate transactions involving state.
Siding with states and traditional brick-and-mortar retailers on a 5-4 vote, Bloomberg reports that the court overturned a 1992 ruling that had made much of the internet a tax-free zone. That decision had shielded retailers from tax-collection duties if they didn’t have a physical presence in a state.
Delivering the opinion of the court, Justice Anthony Kennedy said the physical presence rule in that former case is unsound and incorrect.
This follows last year’s string of successes, when retailers helped to kill a levy on imported goods and saw their federal taxes slashed with a national overhaul.
The full implications are not clear for now but leveling the playing field with brick-and-mortar and sent internet retail stocks tumbling…
Wayfair, Amazon.com, Overstock, Etsy, Shopify, Blue Apron among Internet retailers falling on news.
And that is hitting Nasdaq…
Finally, we note that this decision comes less than 24 hours after Goldman Sachs told their clients to go overweight tech stocks…
Internet retail analysts are rushing to explain away this decision as a nothing-burger, noting that the retail brick-and-mortar survivors have one fewer excuse to blame for their woes.
“They have, in some ways, been hiding behind excuses like a tax differential,” said Edward Yruma, an analyst for KeyBanc Capital Markets. Their complaints have resonated less in recent years as shoppers’ migration online has been more rooted in convenience than price, he said. “What’s driving the success of online players is this is how the consumer wants to shop today,” Yruma said. “It’s that simple.”