Online Sales Tax Looms for E-commerce, Brick-and-Mortar Retailers Rejoice
Online sales tax is becoming a reality and will mean huge changes for e-commerce marketers, per yesterday’s Supreme Court ruling allowing states to collect sales tax on purchases from out-of-state sites. The news sent e-tailer stocks tumbling, Reuters reports.
— NRF (@NRFnews) June 21, 2018
— NRF (@NRFnews) June 21, 2018
In one of the odder slides, Amazon.com was down 1% by noon — even though the e-commerce marketer already collects state and local sales tax, writes Reuters. The Amazon share drop weighed down the entire S&P 500, making it drop almost 1%, as well, the wire service reported.
Other stocks were off, too, with Wayfair down 3.6%, Overstock.com dropping 2%, Etsy off 4.3%, eBay falling 2% and Shopify slumping by 3.4%, says Reuters.
The SCOTUS ruling overturns a 1992 law that gave online retailers an advantage over brick-and-mortar stores, when e-commerce marketers didn’t have to collect online sales tax from customers when they didn’t have physical presences in the state. But the writing may have been on the wall for e-commerce marketers a couple of years ago, when SCOTUS declined to hear the Data and Marketing Association’s appeal of a Colorado law ordering e-commerce marketers to disclose what its buyers purchased for purposes of taxation. Yesterday, the Association of National Advertisers, which just acquired DMA, had no comment about the ruling.
CNBC writes yesterday:
“The ruling is likely to lead other states to try to collect sales tax on purchases from out-of-state online businesses more aggressively. It also likely will lead to many consumers paying more at the online checkout. Forty-five of the 50 states impose sales taxes.”
Brick-and-mortar stores once had the advantage of knowing customers personally. But data drives digital so much that the physical presence distinction for online retailers no longer matters, opines Justice Anthony Kennedy in the decision. Motherboard quotes Kennedy:
“Between targeted advertising and instant access to most consumers via any Internet-enabled device, a business may be present in a state in a meaningful way without that presence being physical in the traditional sense of the term,” Kennedy wrote. “A virtual showroom can show far more inventory, in far more detail, and with greater opportunities for consumer and seller interaction than might be possible for local stores.”
While the ruling may help brick-and-mortar retailers, small e-commerce businesses are watching the ruling closely.
Something to keep in mind about this tweet from Walmart that the NRF retweeted is Walmart.com has a "Global Rank" of 120 on SimilarWeb. It's an e-commerce powerhouse, too.
We applaud👏👏 the @USSupremeCourt decision to close a loophole that produced an uneven playing field for main street businesses. Proud to support legislative action that will benefit our customers & communities. https://t.co/roH5MR36vW
— Walmart Action (@WalmartAction) June 21, 2018
I think it is about time. Brick and mortar stores in Ky, and elsewhere, are suffering because we have to charge sales tax to our customers, but many times not paid on the internet. This will level the playing field and bring money back to local economies!
— Line-X of Kentucky (@linexofky) June 21, 2018
SCOTUS implied that there should be a limit, so I’m hoping $100,000/200 transactions or something similar will be followed. I sold a $12.50 book to just about every state in the U.S. this year.
— Glenn Fleishman (@GlennF) June 21, 2018
Small catalogers and e-commerce marketers may not be impacted to that extent, but the ruling will be a problem and Congress should act to prevent chaos, says Hamilton Davison, who is president and executive director of the American Catalog Mailers Association. In ACMA’s “infuriated by the Supreme Court’s wrong decision” statement released yesterday, the association says the ruling will put small sellers out of business:
By ruling against remote sellers and customers all across America, the High Court’s decision means companies who sell only 100 orders a year must now collect sales taxes for every South Dakota order. “This is a ridiculously small threshold,” Davison said. “A merchant might sell only 100 $20 orders and now be forced to comply with laws well outside its capacity and be subject to horrendous complexity.”
Consumers are also watching:
I buy just as much stuff on Amazon (maybe more) than I did before my state added sales tax. Today’s Supreme Court ruling on online tax won’t increase my trips to brick and mortar stores. Pricing will.
— Derrall Stalvey (@Derrall) June 21, 2018
Not really, internet companies don’t need fancy store fronts and can pick the abolishes cheapest places to set up a facility. Overhead differences alone will create lower prices for online stores. Brick and mortar won’t be saved by sales tax.
— lionsfan22 (@lionsfan522) June 21, 2018
What do you think, marketers?
Please respond in the comments section below.
Related story: State Sales Tax on E-commerce on Its Way?