US Supreme Court Enables States to Collect Taxes on Online Sales Possibly Levelling the Playing Field in US Retail

Executive Summary

• On Thursday, June 21, the US Supreme Court ruled that American states have the right to collect taxes on e-commerce sales regardless of the physical location of the online retailer. The decision reversed a 1992 deliberation that granted a defacto tax break for pure-play retailers.
• Share prices of major US online retailers were down on the day of the court ruling, although companies including Wayfair and Overstock.com discounted any major impact of the ruling on their business.
• Supporters of the decision said that the Supreme Court ruling put an end to an unfair fiscal advantage enjoyed by pure-play retailers and will benefit the community by generating more tax revenues for the states. Opponents said that there could be a negative impact on smaller e-commerce retailers.
• The impact of the Court’s decision will largely depend on how it will be implemented at the state level. Some states might introduce a minimum revenue threshold that should protect smaller players.