On Thursday morning, in a 5-4 ruling, the Supreme Court cleared states to collect sales tax from online retailers, even if those companies don’t have a physical presence in the state.
Big online retailers have managed to avoid paying sales tax since the court’s initial decision in 1992 stating that a company does have to have a physical presence in a state to be taxed.
In their defense, a lot has changed since ’92. According to Justice Anthony M. Kennedy, the initial ruling was made at a time when mail-order sales totaled $180m.
“Last year,” Kennedy wrote, “e-commerce retail sales alone were estimated at $453.5B. Combined with traditional remote sellers, the total exceeds half a trillion dollars.”
Regardless, brick-and-mortar businesses have long complained about the disadvantage of having to charge sales taxes while many of their online competitors do not.
As Bloomberg reports, this broader taxation will let state and local governments collect an extra $8B to $23B a year.
South Dakota, for example, requires retailers with more than $100k in sales or 200 transactions annually in the state to pay a 4.5% tax on purchases.
But, innovators in the fintech space also stand to win big: The stock for Avalara, a sales tax automation company, skyrocketed 30% upon the ruling.
Shares in Amazon were down 1% after the news broke, but, at $1,730 a share, it’s safe to say they’ll be just fine.
It’s the smaller e-tailers that are feeling the pinch: EBay stock fell a whopping 12.6%, the popular home goods seller, Wayfair, fell 9.5%, and Etsy fell 5.7%.