Why Amazon wins with Supreme Court sales tax ruling

Most of Amazon’s competitors, like Wayfair or Overstock, are in a more difficult position because they haven’t been as rigorous or complete about collecting sales tax in states they don’t have a physical presence. Now that they could have to collect tax throughout much of the U.S., beating Amazon on price will become even harder.

Amazon shares were down less than 1 percent Thursday. Overstock, however, saw its shares drop over 6 percent, while Wayfair shares dropped by roughly 8 percent before recovering.

“We see limited impact on Amazon,” Colin Sebastian, an analyst at Baird Equity Research, wrote in a note published Thursday, adding medium-sized merchants that do not already collect sales tax in most U.S. jurisdictions will be most exposed to the ruling.

The more important question for Amazon is how Thursday’s decision will change the way its third-party sellers, who have become a rapidly growing piece of the business, collect sales tax.

Paul Rafelson, a law professor at Pace University, says the Supreme Court decision doesn’t really address this issue, “punting” most of the questions related to marketplace sellers.

In the marketplace, Amazon facilitates the sales of third-party merchant products, so it’s unclear whether Amazon or the third-party seller should be responsible for collecting tax.

“Amazon can hide behind its marketplace to claim tax exemption because it’s still going to pretend it’s not a retailer — and not responsible for collecting sales taxes,” Rafelson said. “There’s still a lot of legal questions that need to be answered.”

Source : CNBC

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