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e-taxes

On Friday last week the US Supreme Court ruled that internet companies need to collect sales taxes (equivalent to our VAT) on sales made in states that they don't have a physical presence. Before, you were only required to collect sales tax if you had a physical presence in a state, which gave online retail a significant advantage over physical stores who were required to charge their customers extra sales tax. With the growth of e-tail, it was only a matter of time before the law was changed. Think of the billions in taxes states have lost out on.

In the book, The Everything Store: Jeff Bezos and the Age of Amazon, you read about how careful Amazon employees had to be when crossing state lines, each employee basically had to take a lawyer with them. They didn't want to give state authorities any excuse to force Amazon to start paying sales taxes.

Since those early days Amazon has started collecting sales taxes, so this ruling will have a limited impact on them. What happened in some states, Amazon approached their government saying that they will build a distribution hub in that state and collect sales taxes but they want corporate tax breaks in exchange.

After the news Amazon's shares dropped around 2%, much less than some of their competitors; e-Bay dropped 12%. Here is what Bloomberg had to say - Online Retailers Can Be Forced to Collect Tax, High Court Rules


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