Amazon, Wayfair and eBay stocks plunge after US court ruling on sales tax

The US Supreme Court freed states and local governments to start collecting billions of dollars in new sales taxes from online retailers, overturning a ruling that had made much of the internet a tax-free zone and put traditional retailers at a disadvantage.

News of the ruling caused shares of Internet retailers including Amazon.com, eBay  and Wayfair to fall.

The court’s 1992 decision involving catalogue sales had shielded retailers from tax-collection duties if they didn’t have a physical presence in a state. Writing for the 5-4 court Thursday, Justice Anthony Kennedy said that ruling was obsolete in the e-commerce era.

Broader taxing power will let state and local governments collect an extra $8 billion to $23 billion a year, according to various estimates. All but five states impose sales taxes.

Wayfair plunged as much as 9.5 per cent on the news, and but recovered to down 1 per cent to $115.13 in New York trading. Amazon.com dropped as much as 1.9 per cent; eBay dropped as much as 12.6 per cent and Etsy fell as much as 5.7 per cent.

The ruling will put new pressure on those companies and other internet retailers and marketplaces that don’t always collect taxes — including Overstock.com, Newegg and thousands of smaller merchants.

Overstock.com lost as much as 7.3 per cent; while 1-800 Flowers.com dropped as much as 1.3 per cent and online educational service Chegg dropped as much as 7.8 per cent. Avalara, which makes tax-processing software, rose 11.9 per cent to $50.37.

Retailers Have One Less Excuse as States Can Tax Online Sales

Amazon, the biggest online retailer, wasn’t involved in the case. Amazon charges consumers in states that impose a sales tax, but only when selling products from its own inventory. About half its sales involve goods owned by millions of third-party merchants, many of which don’t collect tax.