WASHINGTON (Reuters) - States may force online retailers to collect potentially billions of dollars in sales taxes, the U.S. Supreme Court said in a major ruling on Thursday that undercut an advantage many e-commerce companies have enjoyed over brick-and-mortar rivals.
In a 5-4 ruling upholding a South Dakota law challenged by Wayfair Inc, Overstock.com Inc and Newegg Inc, the justices overturned a 1992 high court precedent that had barred states from requiring businesses with no “physical presence” there, like out-of-state online retailers, to collect sales taxes.
Shares of online retailers fell sharply following the ruling, which opened the door to a new revenue stream to fill state coffers - up to $13 billion annually, according to a federal report. Because many e-commerce companies do not collect state sales taxes on purchases, they have had an advantage over brick-and-mortar businesses that do collect it. The ruling also likely will result in many consumers paying more for online purchases.
Wayfair was down 0.7 percent and Overstock off 6.7 percent. Shares of Etsy Inc and eBay Inc, which provide platforms for small retailers to sell their wares, were off 2.4 percent and 2.7 percent, respectively.
Wayfair said it already collects sales taxes on 80 percent of its U.S. orders. “As a result, we do not expect today’s decision to have any noticeable impact on our business, as it may on other retailers who do not currently collect and remit sales tax,” spokeswoman Susan Frechette said.
Overstock also said the decision will have “no appreciable impact on our business.”
The ruling is likely to prompt other states to try to collect sales tax on purchases from out-of-state online businesses more aggressively. Forty-five of the 50 states impose sales taxes on purchases.
The ruling comes against a backdrop
