Get the app
Get the app

Join millions of investors on Stash

Investing, simplified

Start today with as little as $5
Get the app
Money News

Like to Buy Online? Get Ready for Higher Prices

June 21, 2018

A recent Supreme Court ruling could make buying sneakers, dog food, and electronic gadgets online more expensive.

2 min read

The sneakers, dog food, and electronic products you buy online are about to get more expensive.

On Thursday, the Supreme Court ruled in favor of states, saying they may now collect sales tax for online sales.

Why is this a big deal?

For decades, e-commerce companies that do not have a physical presence in states where they sell products have not had to pay state sales taxes. And some states have argued that the exemption for online businesses has deprived them of valuable tax revenue.

Over the years, traditional retailers have also said the exception for online retailers has put them at a disadvantage because they must pay state sales taxes.

The ruling is likely to affect a broad range of online retailers that do business in states where they may not have a physical presence, such as Amazon, eBay, Etsy, Wayfair, and many others.

Traditional retailers are suffering, with many prominent names going out of business. Online retail sales have grown four times faster than so-called bricks and mortar retailers, and are driving half of all growth in the retail industry, according to industry reports.

How will this affect me?

Prices for the things you like to buy online could go up, as online sellers collect sales tax. The tax will be added to the purchase price of your items.

Why don’t online retailers have to pay taxes?

A number of legal decisions, stretching back to the 1960s, protect sellers that don’t have a physical presence in states where they sell.

In 1992, the Supreme Court decided a case that exempted online retailers from state taxes if they did not have a significant presence in a particular state. In 1998 it passed something called the Internet Tax Freedom Act, which prevented random taxes on Internet access and commerce. Lawmakers hoped the legislation would help the (then young) Internet industry grow.

The current high court case stems from a 2016 suit launched by South Dakota against online sellers, requiring them to pay sales tax.

What else could happen?

States could get more revenue: They could gain as much as $34 billion in lost sales tax revenue, according to reports.

E-commerce companies could suffer: While many large retailers such as Amazon already pay sales tax on most things they sell directly, many others do not. Amazon also hosts a network of millions of smaller sellers who don’t currently pay state sales taxes. These independent sellers, who are responsible for about $200 billion of revenue, could now be on the hook, according to reports.

Key terms:

Sales tax: A tax paid by retailers, based on a percentage of the total sale to a consumer. Rates in the U.S. generally range from 3% to 7%. Five states have not sales tax at all.

Interested in learning more about goods and services? Check out these investments on Stash.

Investing, simplified

Start today with as little as $5

Get the App

By Jeremy Quittner
Jeremy Quittner is the senior writer for Stash.

Next for you
AT&T’s Blockbuster Deal with Time Warner

Investment Profile

Bonds Worldwide

An International Bond ETF on Stash

Learn more
Explore more articlesChoose a topic to learn more about
politics market news love and money Technology social media

This material has been distributed for informational and educational purposes only, represents an assessment of the market environment as of the date of publication, is subject to change without notice, and is not intended as investment, legal, accounting, or tax advice or opinion. Stash assumes no obligation to provide notifications of changes in any factors that could affect the information provided. This information should not be relied upon by the reader as research or investment advice regarding any issuer or security in particular. The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective.

Furthermore, the information presented does not take into consideration commissions, tax implications, or other transactional costs, which may significantly affect the economic consequences of a given strategy or investment decision. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. There is no guarantee that any investment strategy will work under all market conditions or is suitable for all investors. Each investor should evaluate their ability to invest long term, especially during periods of downturn in the market. Investors should not substitute these materials for professional services, and should seek advice from an independent advisor before acting on any information presented. Before investing, please carefully consider your willingness to take on risk and your financial ability to afford investment losses when deciding how much individual security exposure to have in your investment portfolio.

Past performance does not guarantee future results. There is a potential for loss as well as gain in investing. Stash does not represent in any manner that the circumstances described herein will result in any particular outcome. While the data and analysis Stash uses from third party sources is believed to be reliable, Stash does not guarantee the accuracy of such information. Nothing in this article should be considered as a solicitation or offer, or recommendation, to buy or sell any particular security or investment product or to engage in any investment strategy. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. Stash does not provide personalized financial planning to investors, such as estate, tax, or retirement planning. Investment advisory services are only provided to investors who become Stash Clients pursuant to a written Advisory Agreement. For more information please visit