Amazon (AMZN) and other e-commerce stocks fell Thursday, following a closely watched U.S. Supreme Court decision saying states can collect taxes from retailers that do not have a physical presence there.
The decision in South Dakota vs. Wayfair is a victory for states who argued they were losing out on billions of dollars each year. That was due to an outdated Supreme Court decision on sales tax collection. Wayfair (W) operates five online retail sites that sell a variety of goods for the home.
The 5-to-4 decision overturned a 1992 decision, Quill vs. North Dakota, that involved mail-order catalogs. That older case prevented states from collecting a sales tax from retailers without a physical presence in their state. This latest Supreme Court ruling said that earlier decision was obsolete in an era of explosive e-commerce.
Justice Anthony M. Kennedy, who wrote the majority decision, said the previous ruling unfairly disadvantaged traditional brick-and-mortar stores.
The decision in South Dakota vs. Wayfair is a victory for states who argued they were losing out on billions of dollars each year. That was due to an outdated Supreme Court decision on sales tax collection. Wayfair (W) operates five online retail sites that sell a variety of goods for the home.
The 5-to-4 decision overturned a 1992 decision, Quill vs. North Dakota, that involved mail-order catalogs. That older case prevented states from collecting a sales tax from retailers without a physical presence in their state. This latest Supreme Court ruling said that earlier decision was obsolete in an era of explosive e-commerce.
Justice Anthony M. Kennedy, who wrote the majority decision, said the previous ruling unfairly disadvantaged traditional brick-and-mortar stores.
Amazon, Shopify (SHOP), Etsy (ETSY) and Wayfair and other e-commerce stocks all were down. But the decision was a boost for Avalara (AVLR), which held its initial public offering last week. Avalara shares closed at 51.04, soaring by 13.5%, on the stock market today.
Navigating Tax Compliance
Avalara provides a cloud-based software platform to help its customers navigate the complicated and highly regulated world of tax compliance. The company automates the processes of determining taxability and applicable tax rates. It prepares and files returns, maintains tax records and manages compliance documents.
The Avalara IPO priced shares at 24 and popped 87% on its first day of trading.
Among e-commerce stocks, Amazon shares skidded 1.1% to 1,730.22. Shopify fell 4.8%, to 164.54. Etsy dropped 1.4% to 43.60. and Wayfair lost 1.6%, closing at 114.28.
Many big retailers already collect out-of-state taxes, including Amazon, Apple (AAPL), Walmart (WMT) and Target (TGT).
The ruling is likely to have the biggest impact on small e-commerce companies.
