TECHNOLOGY
What the High Court Online Sales Tax Ruling Means for Retailers
Updated on
States can require online tax collection, Supreme Court rules
Decision reverses a 1992 decision that chains have decried
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The industry is on a winning streak after the U.S. Supreme Court ruled that states can collect sales tax on internet purchases, overturning a 1992 decision that traditional retailers said put them at a disadvantage with online competitors. 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.
Good news is a welcome change for a sector that’s endured a brutal few years with surging bankruptcies, store closings and the liquidation of big-name chains like Sports Authority Inc. and Toys “R” Us Inc.
Now, the retail survivors have one less 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.”Shares of Wayfair Inc. plunged as much as 9.5 percent to $105.11 after the ruling was announced. Amazon.com Inc. dropped as much as 1.9 percent to $1,717.56.
What’s Ahead
The long-term impact of the Supreme Court’s decision remains to be seen. States were already collecting about 75 percent of the potential taxes from online purchases, according to the Government Accountability Office. The portion not being taxed could total as much as $13 billion a year, the GAO said.