Online retailers can be forced to collect tax, says US court

Bloomberg

The US Supreme Court freed states and local governments to start collecting billions of dollars in new sales taxes from online retailers, overturning a ruling that had made much of the internet a tax-free zone and put traditional retailers at a disadvantage.
News of the ruling caused shares of Internet retailers including Amazon.com Inc. and Wayfair Inc. to fall.
The court’s 1992 decision involving catalog sales had shielded retailers from tax-collection duties if they didn’t have a physical presence in a state. Writing for the 5-4 court, Justice Anthony Kennedy said that ruling was obsolete in the e-commerce era.
Broader taxing power will let state and local governments collect an extra $8 billion to $23 billion a year, according to various estimates. All but five states impose sales taxes.
Wayfair plunged as much as 9.5 percent on the news, and was down 1 percent to $115.13 at in New York trading.
Amazon.com dropped as much as 1.9 percent; EBay Inc. dropped as much as 12.6 percent and Etsy Inc. fell as much as 5.7 percent.
The ruling will put new pressure on those companies and other internet retailers and marketplaces that don’t always collect taxes — including Overstock.com Inc., Newegg Inc. and thousands of smaller merchants. Overstock.com lost 7.3 percent; while 1-800 Flowers.com Inc. dropped as much as 1.3 percent and online educational service Chegg Inc. dropped as much as 7.8 percent.
Amazon, the biggest online retailer, wasn’t involved in the case. Amazon charges consumers in states that impose a sales tax, but only when selling products from its own inventory.
About half its sales involve goods owned by millions of third-party merchants, many of which don’t collect tax.
A key question for Amazon will be how states will go about collecting taxes from those sellers. An Amazon spokeswoman declined to comment.
The ruling is a victory for South Dakota, whose law requires retailers with more than $100,000 in sales or 200 transactions annually in the state to pay a 4.5 percent tax on purchases.
Although the court left open the possibility that other arguments could be pressed against the South Dakota law, Kennedy’s majority opinion strongly suggested the measure was constitutional, in part because it has the $100,000 threshold and doesn’t try to impose retroactive taxation.
“South Dakota’s tax system includes several features that appear designed to prevent discrimination against or undue burdens upon interstate commerce,” Kennedy wrote.
President Donald Trump told governors meeting at the White House that the ruling is “a big, big victory” for them and that it was a “good decision.”