Online retail stocks such as Amazon.com, Ebay.com and Overstock.com sank in early trading on Thursday after the U.S. Supreme Court issued a 5-4 ruling that opens the door for states to charge sales tax on e-commerce purchases.
Amazon’s stock is trading at a 7-point deficit, as of 12:02 E.T., after rebounding from a 38-point drop. Meanwhile, Ebay and Wayfair are down roughly 1 percent, Shopify is down 2 percent and Overstock is down 3 percent.
In the case of South Dakota vs. Wayfair Inc., the court ruled in favor of South Dakota, allowing the state to move forward with its legislation requiring out-of-state retailers to pay sales tax if they “deliver more than $100,000 of goods or services into the state or engage in 200 or more separate transactions.”
Justice Anthony Kennedy delivered the court’s opinion and was joined by Justices Clarence Thomas, Ruth Bader Ginsburg, Samuel Alito Jr. and Neil Gorsuch. Justice John Robert wrote the dissenting opinion.
Previously, municipalities were not allowed to collect sales tax from sellers if the company did not not have a significant physical presence in a state, such as a warehouse or office. Instead, consumers were responsible for paying the taxes, but few complied. That was according to the 1992 Supreme Court case Quill Corp. v. North Dakota.
However, today’s decision overrules Quill, freeing states to enact new tax laws that would garner funds for local public services. For instance, South Dakota claimed to be losing out on $48 million to $58 million annually, according to the court.
Though Amazon was not part of the case before the Supreme Court, the etailer has been the subject of repeated criticism by President Donald Trump in regard to the firm’s tax payments.
In March, reports surfaced that the president was mulling ideas to “go after” the e-giant with various tax and antitrust laws.