The Supreme Court just issued a major ruling on how online retailers can charge sales tax. Here's what it means for Amazon.
Getty/Rick T. Wilking
- The United States Supreme Court ruled in favor of South Dakota in Wayfair vs. South Dakota on Thursday.
- The decision paves the way for states to collect sales tax on online purchases that cross state lines, even if the retailer does not have a physical presence in that particular state.
- It likely won't have a big impact on Amazon, as the US' largest e-commerce retailer already charges sales tax in the 45 states that require it.
The United States Supreme Court released a major decision about online sales tax on Thursday, but the country's largest e-commerce company is largely inoculated against any fallout from it.
The decision paves the way for states to force online merchants to collect sales tax on orders from residents, regardless of where the company itself exists. Previously, federal law stated that a state could only force an online store to collect sales tax if it had a "physical presence" in that state.
Somewhere along the line, Amazon got so big that it now has what could be called a "physical presence" (in the form of fulfillment centers) in nearly every state, and so it decided to start charging sales tax in every state that levied one.
"It would have been a bigger deal for Amazon if this ruling has been made 10 years ago," Sucharita Kodali, a vice president and principal analyst at Forrester Research, told Business Insider. "At this point, it won't affect Amazon in any material way. They've been easing into this for years."
Daniel Ives, chief strategy officer and head of technology research at GBH Insights, called it "a net slight negative for Amazon, but not a dynamic we view significantly moving the needle," meaning Amazon likely won't see much effect from it.
The slight negative is in regards to Amazon's third-party sellers.
"Some Amazon third-party sellers will now have to assess taxes on shoppers, but I don't think it will come as a shock to customers," Kodali said.
Any near-term confusion would likely peter out as customers get used to the change, but it will likely be a bigger deal for other only-online stores like Etsy, Ebay, and Overstock.
"They will lose some share in the near term, and local stores may see some of that volume but customers will adjust over time," Kodali said.
So who is really winning here? The answer is state governments, which will get a boost to their budget's bottom line, and brick-and-mortar stores that never dealt with the online marketplace anyway.
NOW WATCH: We tried the 'Five Guys' secret menu
- Elon Musk sparks another Shiba Inu rally ‘to the moon’ — other Shiba coins follow suit
- Elon Musk’s puppy, a new strategy to burn tokens, and altcoins playing catch up — the perfect storm for cryptocurrency Shiba Inu to skyrocket
- Apple M1 Pro and M1 Max vs M1: Here’s what Apple improved with its new custom chips
- Best gaming mouse for battle royale games in India
- Best tablets for professional use in India
- Ethereum may offer the best returns, but investors have been pulling away over the last two weeks
- Google starts starts testing new safety section for apps, feature to go live in February 2022
- Horlicks and Boost maker HUL sees slowdown in food segment in the last three months