Retail War Takes New Turn: Will Sales Tax Hit E-commerce?
Zacks Investment Research | Jun 21, 2018 09:28PM ET
The Supreme Court on Jun 21 ruled that states have the right to collect sales tax from online purchases even if a company doesn’t have any physical presence in that state. This certainly is a game-changing decision given that businesses, primarily online retailers, so long were not bound to collect sales tax in states where they do not operate physically.
The Supreme Court ruling has been cheered by brick-and-mortar stores, which have been struggling to survive the e-commerce onslaught. That said, many online retailers are already collecting sales tax on their products in different states. Given this scenario, it needs to be seen, how big a pinch e-commerce companies would feel now.
Online Retail Hits Roadblock
The Supreme Court on Thursday ruled that states can collect sales tax on online purchases, overturning a 1992 decision that traditional retailers so long complained was putting them at disadvantageous position compared with online competitors. Although retailers with a physical presence were required to collect sales tax, it wasn’t binding on online retailers and upstarts, which would often skip it, thus making their products look cheaper.
The latest ruling definitely will bring relief for brick-and-mortar stores, which are striving to compete with e-commerce companies. The new ruling saw shares of traditional retailers jump immediately. Shares of Walmart (NYSE:WMT), Inc. (NYSE:W) and Dollar General Corporation (NYSE:DG) increased 0.7% each, while Target Corporation (NYSE:TGT) jumped 1%.
On the other hand and quite predictably, shares of online retailers like Amazon.com, Inc. (NASDAQ:AMZN) , eBay, Inc. (NASDAQ:EBAY) and Etsy, Inc. (NASDAQ:ETSY) slid 1.1%, 3.2% and 0.6%, respectively. Amazon has a Zacks Rank #1 (Strong Buy). You can see Zacks Investment Research
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