This past week, Amazon was featured in many headline mainstream articles in response to the Supreme Court decision in South Dakota v. Wayfair Inc. In this verdict, SCOTUS ruled that “internet retailers can be required to collect sales taxes even in states where they have no physical presence” (New York Times). Although Amazon was not directly involved in the case, as the leading e-commerce marketplace, many could not help but speculate what affect this ruling will have on them.
If
you’re not familiar with the case and its history, here are the highlights:

As online retailing has grown to become a multibillion-dollar
industry, there has been a varying sense of agreement as to whether this still
makes sense or if there was enough reasoning for reconsideration of this decision.
E-commerce already had a noticeable edge on
brick and mortar stores with wider selections, convenience of delivery to your
doorstep, and cheaper prices. And Justice Anthony M. Kennedy speculated that the Quill
decision caused states to lose annual tax revenues of tens of billions.
In 2015 Justice Stephen G. Breyer called for a review of the
1992 ruling, which sparked many states enact “kill Quill” legislation beginning
the legal process of reversing the initial ruling. South Dakota was one of
these states, enacting a law requiring all merchants with more than $100,000 in
annual revenue or more than 200 sales in a their state to collect a 4.5% sales
tax. When Wayfair, Overstock.com and Newegg violated this law, state officials
opened a lawsuit against them.
On June 21st, SCOTUS gave their final verdict in
South Dakota v. Wayfair, Inc. overturning the 1992 ruling that prohibited
states from collecting sales tax from businesses that do not have a
“substantial” connection to that state, and opening the doors to allowing for
the collection of state sales tax from internet retailers, even when those who
have no physical presence in those states. Many see this verdict as a major and necessary step in
leveling the playing field between e-commerce and brick and mortar stores.

While
South Dakota was the clear winner in this case, they are not the only ones who
will see a benefit; likewise Wayfair will not be the only one seeing or needing to
make change their practices.
Here’s who is most likely to be affected:
- Customers will likely encounter higher prices on retailer sites that were not previously incorporating sales tax, like Wayfair
- Small e-commerce start-ups looking to sell nationally, while also stay in compliance with each state’s unique tax requirements
- Medium-size e-commerce merchants like Wayfair.com and Overstock.com, who have been skirting state sales tax in states where they do not have physical presence
- 3rd -Party Amazon sellers

3rd-Party sellers on Amazon were previously not required to pay sales taxes, which they now will be. The ruling provided no specific guidance about whether Amazon or the 3rd-Party sellers themselves will be responsible for deriving and collecting sales tax, however this will be a significant change for many. Some states have already provided specific regulation indicating this is the responsibility of Amazon, such as Washington and Pennsylvannia, but this has been determined on a national level. And given Thursday’s ruling, states may revise their tax laws to elicit sales tax from the 3rd-Party sellers over Amazon (CNBC).
Now for
the good news, here’s who will likely benefit from this ruling:
Here’s why Amazon and Amazon vendors are set to benefit:
Amazon was already collecting sales tax on products it sells directly in the 45 states that collect a sales tax, so vendors selling through Vendor Central are not likely to see the price of their products increase or make any changes to their sales processes. However, this is not the case for 3rd party sellers, who will be required to make this change. This means that 3rd-Party competition could become less of a rival if their prices increase, or they feel discouraged by the knowledge that they must now navigate state specific tax laws - an added stress for sellers looking for an easy profit.
We look
forward to following this closely and will update you as we do.