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What's going on?

On Friday, the US Supreme Court ruled that ecommerce companies must collect taxes on sales, even if they dont have a physical store in the state where the sale is made and ecommerce stocks fell by as much as 6%.

What does this mean?

In 1992, judges ruled that retailers didnt have to collect a local sales tax if they didnt have a physical presence in a given state. This meant that online retailers like Amazon and Wayfair could charge even lower prices than their store-based competitors in parts of America, partly fueling the growth of ecommerce, at the expense of traditional retailers.


While that decision has since been overturned, its only in a single state so far other US states will likely have to meet certain terms and conditions in order to benefit from the ruling.

Why should I care?

For markets: Ecommerce stocks fell on the news.


Stocks of Wayfair and eBay lost between 2-4% of their value. And share prices of the UKs online fashion retailers Boohoo and ASOS fell by 3% and 6%, respectively since they each make about 15% of their sales to US customers. Companies will likely have to raise prices in some states (to include sales taxes) which may lead to fewer sales. Amazons stock only fell by 1% because it already collects tax in most states for its own sales but third party sellers on its marketplace havent had to, so they’ll take a hit.



The bigger picture: Taxes and regulation are techs flavors of the day, especially in Europe.


In March, the European Union proposed taxes on large tech companies operating in the region. And while theres renewed focus on data privacy in the wake of the Facebook scandal, falling afoul of Europes new data protection regulation could cost companies $12 million or 2% of global sales.

Originally posted as part of the Finimize daily email.

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