Amazon (AMZN) and other e-commerce stocks fell Thursday, following a closely watched U.S. Supreme Court decision saying states can collect taxes from retailers that do not have a physical presence there.
States can, however, begin passing laws that require online retailers to collect sales tax from customers even if they have no physical presence in a state.
In the amicus brief eBay filed in support of the retailers South Dakota had sued over collecting sales taxes - Wayfair, Overstock and Newegg - the company said overturning Quill would "greatly undermine the growth opportunities available to the hundreds of thousands (if not millions) of independent small businesses that sell online and represent a vital segment of the national economy".
The South Dakota law, enacted in 2016, required out-of-state online retailers to collect sales tax if they amass $100,000 in sales or 200 separate transactions.
"CEO Matthew Shay said in a statement Thursday that the ruling clears the way for "a fair and level playing field where all retailers compete under the same sales tax rules" no matter whether they operate online, in stores or both".
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The Trump administration had urged the justices to side with South Dakota.
But NetChoice, a trade association for e-commerce firms, warned small businesses would have trouble complying with the different tax requirements in each state. Quill determined how state taxes worked with e-commerce from the web's first days. North Dakota - was "flawed on its own terms" and was especially problematic due to the rise of internet retail.
"Attempts to apply the physical presence rule to online retail sales are proving unworkable".
Now that Amazon's distribution network spans the country, it collects sales tax nationwide, though it doesn't collect on behalf of third-party sellers.
Amazon (AMZN, -1.1%) - which already collects tax on all its direct sales but not sales by independent merchants through its site - declined to comment.
The biggest jewelry e-tailer, Blue Nile, now collects sales tax only in Washington, New York, and Virginia.
Chris Geehern, a spokesman for Associated Industries of MA, a business trade group, said the court ruling has the potential to "introduce a high degree of complexity for companies that do sell things over the web".
"Wayfair already collects and remits sales tax on approximately 80% of our orders in the United States, a number that continues to grow as we expand our logistics footprint".
When the internet was in its infancy, online retailers such as Amazon took advantage of tax laws - which hadn't yet caught up with technology - to offer low prices online. Dissenting justices were John Roberts, Stephen Breyer, Sonia Sotomayor, and Elena Kagan.
A "quarter century of experience has convinced me" the Supreme Court's earlier decision was no longer justified, he wrote, adding that it was "never too late" to arrive at a better position.
Most of the top 20 online sellers already collect taxes in almost all states, either because they have added local showrooms or warehouses, or because of state laws.
Kennedy wrote that the 1992 precedent that affirmed that a physical presence is required - a case called Quill v.
The Supreme Court justices ruled 5-4 that states could collect sales tax from internet sales.