— This is the script of CNBC's news report for China's CCTV on June 22, 2018, Friday.
During the overnight, the US Supreme Court ruled by 5 to 4 that US states have the right to levy tax on online sales. There is a difference in US consumption habits. In US, product price is a pre-tax price, and consumer will pay the tax when they make payment. E-commerce in US still followed the rules of several decades ago before this judgment released in the overnight. Let’s make an example, if the physical store of an e-commerce retailer is registered in New Jersey, but in another state, such as New York, it doesn’t own brick-and-mortar business, then the consumers in New York state don’t have to pay consumption tax if they shopping on this ecommerce.
Actually, in 1992, the Supreme Court barred states from requiring businesses with no "physical presence" there to collect sales taxes. However, the overnight vote overturned this judgment. After this decision, all consumers in New Jersey state have to pay tax according to local consumption tax rate, no matter whether this shop that was registered in New Jersey has a brick-and-mortar business in New York state or not.
It’s obvious that who is the winner and who is the loser now. Winner will be the government: it is a new source of revenue to the states. Loser will be the consumers and ecommerce retailers, because that results in the online shopping consumers to pay more. But for the states, this law brings different benefits to them. For example, the state that depends on ecommerce revenue benefits the most, including Louisiana, Tennessee, South Dakota, Oklahoma, and Alabama, among them, South Dakota estimates that with the collection of these taxes, the state government may increase revenue by 50 million U.S. dollars a year. Therefore, a decline was seen in the stock price of ecommerce giants following this judgment.
For instance, Amazon shed 1.13%, many ecommerce retailers, such as amazon.
They collected consumption tax on the product that was bought from their website, but didn’t levy consumption tax on the product that was sale by the 3rd party on its website. We know that the 3rd party accounts for a half of amazon’s total sales, and the new law means the states can impose more tax on those sales.
US president Trump who supports traditional brick and mortar business wrote on Twitter that this judgment is a winning for fairness and US, as well as consumers and physical stores. And what will be the influence to consumers? We will keep an eye on this issue.