Supreme Court ruling paves way for US states to collect online sales tax

Bricks-and-mortar retailers secured a big win over the internet economy on Thursday as the US Supreme Court overturned a ruling that had enabled many ecommerce retailers to avoid collecting sales tax from their customers.

In a case with profound implications for the consumer economy, the justices ruled that US states have the right to levy sales tax on online sales even if the retailer does not have a store or warehouse in the state.

The perceived tax exemption for ecommerce has become the most contentious political issue in US retail as bricks-and-mortar stores blame it for their wilting performance. Online stores countered that their success is about convenience and not tax.

Ending a years-long legal battle, the Supreme Court ruled that a requirement that sales tax to be tied to a retailer having a “physical presence” in a state was outdated.

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Shares down

Shares of online retailers moved sharply lower on Thursday after the decision.

Amazon shares were down about 1 per cent, Overstock. com fell 2.5 per cent, furnishings retailer Wayfair dropped 3.8 per cent, auction-based seller Ebay shed nearly 2 per cent and Etsy, a marketplace for handmade and artisan items, declined almost 3 per cent.

Traditional retailers were quick to celebrate with one lobby group, the Retail Industry Leaders Association, saying: "Today's decision culminates years of tireless work by the retail community to reverse a pre-internet era rule that distorts free markets and puts local brick and mortar stores at a competitive disadvantage with their online-only counterparts." – Copyright The Financial Times Limited 2018