The Supreme Court of the United States ruled yesterday that states could require online companies to collect sales taxes on internet purchases made by consumers in states where the online businesses do not have a physical presence. For example, under the new ruling, when a consumer living in Florida makes an online purchase from a company that has an exclusive physical presence in New York, the state of Florida can now require the New York-based company to collect Florida’s state sales tax on the sale.
Indeed, many small businesses favored the ruling because they had difficulty competing with the steep discounts often afforded by massive online retailers. Likewise, many states were frustrated by the impact of tax-free internet sales that were potentially depriving those states of tax revenues that by some estimates could be between $8 and $23 billion dollars a year.
The court’s ruling could have wide-ranging implications on e-commerce. While the law is often slow to evolve, the Supreme Court’s recent ruling may be an indication that our nation’s highest court is shifting its perspective on discarding outdated legal principles when confronted with new technologies and business structures.
In the short term, however, the news dealt a blow to some investors who saw a number of online giants’ stock prices dip. Wayfair’s price dropped as much as 9.5%, while Amazon and eBay fell at their lowest to 1.9% and 12.6%, respectively.
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