The Supreme Court just caused stocks of online retailers to tumble

Donna Miller
June 22, 2018

The US Supreme Court on Thursday gave states the ability to require online and out-of-state retailers to collect and send them state sales taxes.

By one government estimate, states can stand to reap between $8 billion and $13 billion in new revenue.

For as long as internet shopping has been around, the issue of sales tax has been a hot-button issue.

South Dakota Gov. Dennis Daugaard called Thursday's decision a "Great Day for South Dakota", though the high court stopped short of greenlighting the state's law. "Big victory for fairness and for our country".

What this ultimately means for consumers is that online purchases could potentially become more expensive. "This is a big win for local brick-and-mortar retailers, who will now get a chance to compete on a level playing field with out-of-state internet companies that have maintained an unfair edge by not collecting sales taxes".

Before this ruling, online retailers had to have a physical presence in a state to be subjected to that state's sales tax.

Furniture seller Wayfair and online merchant Overstock.com - two of the parties to the case - saw their shares fall, along with other online retailers. Amazon shares were trading down slightly after the news. Justice Anthony Kennedy wrote the 5-4 decision, joined by Justices Clarence Thomas, Ruth Bader Ginsburg, Samuel Alito and Neil Gorsuch. Amazon declined to comment on the Supreme Court ruling Thursday.

The Trump administration had urged the justices to side with South Dakota.

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Governor Pete Ricketts reacted to the ruling.

Stay tuned as some states can be counted on to move swiftly with today's new ruling. "Any adjustment to those rules with the potential to disrupt the development of such a critical segment of the economy should be undertaken by Congress". By then, the growth of mail order catalogs was raising the question of sales where the customer certainly has a physical presence in a state or municipality, but the business does not. But it also means costs will go up for consumers and small online businesses might struggle with disparate tax rates around the country.

South Dakota Attorney General Marty Jackley, who argued the case in front of the Supreme Court, applauded the ruling. "It's up to the states to prove that we can actually be responsible, that we don't need Congress to show us and tell us what to do".

The ruling opens the door for some New Hampshire-based retailers to be forced to collect sales tax from their online customers living in other states.

"Online retailers still have a lot of pricing power because their overhead costs are low and that would make it hard for those with stores to benefit substantially". Target Corp closed up 1 percent and Walmart Inc was up 0.7 percent.

The states that are likely to see the biggest percentage increase in revenue are Louisiana, Tennessee, South Dakota, Oklahoma and Alabama, according to the Barclays research.

Kaufman said he does not anticipate any legislative action either.

"The majority really removed that uniformity and guidance of the old rule and leaves taxpayers unsure of what the new rule is", said Clark Calhoun, a tax lawyer at Alston & Bird who wrote a brief urging the court to retain the physical presence standard. "It's a drain on our economy and a drain on our main streets and our local sellers", said Jon Hurst, president of the Retailers Association of MA.

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