You’re About to Pay Higher Online Taxes After Supreme Court Ruling

Shopping online is about to get more expensive.

The Supreme Court ruled on Thursday that states can force retailers to collect sales tax even if they don't have a physical presence in that state.

Credit: Shutterstock

(Image credit: Shutterstock)

The 5-4 decision overturns the 1992 Supreme Court ruling that barred states from collecting sales tax in states where they have no physical storefront.

How will this affect your wallet? Prior to the ruling, if you lived in New York and bought a TV from a retailer like Newegg — which has no physical stores in New York state — you wouldn't have to pay sales tax on your purchase. This would amount to substantial savings for shoppers.

However, under the new ruling, New York consumers would have to pay sales tax even though Newegg has no physical storefront in the Empire state.

Many e-commerce giants like Amazon and Walmart already collect sales tax because they're so big they have a large enough presence throughout various states to collect sales tax. However, smaller e-tailers like Newegg used to have a no-tax advantage. As a result, states argued they would lose millions in sales tax each year.

Shares of Amazon, Etsy, and eBay dropped after the ruling, though it's too early to tell if this will deter shoppers from purchasing online, which is unlikely considering how fast e-commerce is growing.