On the Money

The Supreme Court just made online shopping more expensive for consumers, and Amazon could dodge a bullet

Key Points
  • The Supreme Court ruled this week that states can force online retailers to charge sales tax.
  • The ruling might hurt small online only retailers, an industry expert told CNBC.
  • Larger online retailer, such as Amazon, may actually benefit, Jan Kniffen said.
Tax & Spend

Buying online is about to get more expensive.

This week, the Supreme Court ruled states can now force all online retailers to collect sales tax from consumers.

The decision overturned a 1992 ruling that said retailers without a “physical presence” in a state were not required to charge consumers sales taxes.

In an interview with CNBC’s On The Money, retail expert Jan Kniffen recalled he was a senior retail executive when the court judgement came down. “We all knew at the time this it was going to be a real problem because it will create a differential in pricing,” he said.

That price difference, he explained, is now about 8 percent, “if you take the average of the [state] sales taxes across the nation.” In the past, buyers who bought online could often avoid paying the sales tax.

“The good news at the time was online was so small, nobody was too concerned about it. But we all saw something coming there.”

Kniffen, who is CEO of J. Rogers Kniffen WWE, stated that “If you buy something in New York and have it shipped to New Jersey, you don’t pay New York tax, you don’t pay New Jersey tax. But you owe New Jersey tax. But nobody pays it."

Technically, buyers were supposed to pay the tax themselves to their state, but few did. The Supreme Court cited an estimate from a California tax board, that found 96 percent didn’t do it.

The Amazon effect

While Amazon has been a big focus since the ruling, Kniffen predicted electronics retailer Best Buy could emerge as a big winner in the ruling's aftermath.

As an example, he pointed to a $3,000 television purchased from on online retailer without the 8 percent tax, would be $240 cheaper than .

“They sell against online all the time. So (they’ve) been fighting this eight percentage point battle against big ticket items that people will change buying habits over every time.”

Recently, The Washington Post reported 19 of the top 20 online retailers are already collecting sales tax, including , , and .

Kniffen told CNBC he knows who this ruling will hurt—and it's not any of the industry behemoths.

“In general, this is a bad thing if you’re a small, online-only retailer. This isn’t going to hurt Amazon, they’ve got all the systems to handle this," he said.

"In 2017 they finally started paying sales tax in the last state. But for third party players on Amazon, they still don’t collect the sales tax," Kniffen added. He predicted Amazon will benefit, since they already have the technology and software .

“Amazon does this every day. They can do every zip code in America and figure it out. So all they’ve got to do is sell the service to every online player," the analyst said.

When asked what impact the ruling would have on shoppers, Kniffen said that consumers won't "change [their] shopping habits because this law went into effect," he said. "You are still going to move online more everyday than you did the day before.”

On the Money airs on CNBC Saturday at 5:30 am ET, or check listings for air times in local markets.