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The Zacks Analyst Blog Highlights: Etsy, eBay, Amazon and PetMed Express
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For Immediate Release
Chicago, IL – April 20, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Etsy (ETSY - Free Report) , eBay (EBAY - Free Report) , Amazon (AMZN - Free Report) and PetMed Express (PETS - Free Report) .
Supreme Court Can't Solve the Internet Sales Tax Problem
As the Supreme Court discusses the pros and cons of overriding the precedent set in the case of Quill vs. North Dakota, small sellers and platforms like Etsy and eBay that support them have started doing all they can to rouse public opinion against it.
In that case, the High Court upheld the decision of a lower court that only retailers with a physical presence in a state need to collect the state sales tax.
Now, South Dakota is looking to challenge the decision/precedent/effective law with a 2016 law of its own. Accordingly, out-of-state sellers doing more than $100,000 of business in the state or more than 200 transactions annually have to collect state sales tax and deposit it with the concerned state authority. And online sellers Overstock.com, Wayfair and Newegg are caught in the crossfire.
The current law makes it easy for micro operations to leverage online marketplaces to sell their wares to a wider clientele. Since they obviously don’t have a physical presence in all the states to which they are delivering, they don’t collect or pay any sales tax. The lack of complications and relatively lower price (that don’t include the sales tax) therefore allowed them to prosper.
Three Perceived Problems
First, it hits revenue in the states where the goods are sold since the sales aren’t taxed.
Second, the relative affordability of online products compared to brick and mortar operations in the state that have to include the sales tax in the price leads to even lower revenue for the states. So this is something of a double-whammy for states.
Third, for brick and mortar operations, this is unfair competition.
So it isn’t surprising that around 40 states are looking to override the precedent, with some support from lawmakers. President Trump is with the states, but that’s not the issue here.
Judges Scratching Their Heads
Some justices are going with the Trump administration (and the states), expressing concern over the financial condition of states and how they need every bit of revenue that’s owed to them.
Others are wary of the obvious problem that a change would badly hit small sellers, who have limited resources to tackle the separate tax laws across an estimated 12,000 state and local jurisdictions. A counter-argument is that if forced, suitable software would come into being that would take care of things. But whatever the case, it would drive up costs for small sellers that could include middlemen to handle the tax issue.
Another thought is that small sellers, if pushed by the law, could be driven straight to big online platforms like Amazon’s that could handle the complexity for a small fee. In the words of Justice Elena Kagan, “There’s something a little bit ironic in saying the problem with Quill is that it benefited all these companies, so now we’re going to overturn Quill so that we can benefit the exact same companies.”
The fourth argument (in support of just letting things be) is that states, upon finding no recourse in courts, have already started adopting workarounds. Online merchants in Colorado for example, are required to report their transactions so the state can collect from buyers directly, according to Justice Neil Gorsuch.
Fifth, Chief Justice John Roberts also supports status quo because since the big online retailers are already covered, it is a diminishing problem.
No Solution at This Point
Everyone realizes that the states are losing revenue, but the real question is how much. And some justices have raised the issue of limited information on how much money is at stake.
The states basically need to do a lot more homework. It’s one thing to say that a state is losing revenue to another state, but the opposite is also true: that that other state is also losing revenue at its expense. Because small sellers are there in every state. So when claiming monetary loss, the gains have to be deducted. And at the end of the day, some will obviously be making gains versus others making losses. So the problem may boil down to a difference in tax rates or value of goods instead.
Second, tax layers and rates vary across states, so there could be inequalities among states in this respect as well.
Third, the value of goods supplied can vary between states with more processed items in general having more value added. So states selling less processed goods can earn relatively less unless they charge a higher rate.
The problem arises because the current system recognizes the sale in the state in which it occurs. If all sales by a seller were simply taxed in the state of his/her residence, the problem would be solved.
Overhauling the tax law or making any changes in it is a function of the legislature and not the judiciary, which is entrusted with its interpretation only. So it’s difficult for the court to solve the problem.
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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The Zacks Analyst Blog Highlights: Etsy, eBay, Amazon and PetMed Express
For Immediate Release
Chicago, IL – April 20, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Etsy (ETSY - Free Report) , eBay (EBAY - Free Report) , Amazon (AMZN - Free Report) and PetMed Express (PETS - Free Report) .
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Thursday’s Analyst Blog:
Supreme Court Can't Solve the Internet Sales Tax Problem
As the Supreme Court discusses the pros and cons of overriding the precedent set in the case of Quill vs. North Dakota, small sellers and platforms like Etsy and eBay that support them have started doing all they can to rouse public opinion against it.
In that case, the High Court upheld the decision of a lower court that only retailers with a physical presence in a state need to collect the state sales tax.
Now, South Dakota is looking to challenge the decision/precedent/effective law with a 2016 law of its own. Accordingly, out-of-state sellers doing more than $100,000 of business in the state or more than 200 transactions annually have to collect state sales tax and deposit it with the concerned state authority. And online sellers Overstock.com, Wayfair and Newegg are caught in the crossfire.
The current law makes it easy for micro operations to leverage online marketplaces to sell their wares to a wider clientele. Since they obviously don’t have a physical presence in all the states to which they are delivering, they don’t collect or pay any sales tax. The lack of complications and relatively lower price (that don’t include the sales tax) therefore allowed them to prosper.
Three Perceived Problems
First, it hits revenue in the states where the goods are sold since the sales aren’t taxed.
Second, the relative affordability of online products compared to brick and mortar operations in the state that have to include the sales tax in the price leads to even lower revenue for the states. So this is something of a double-whammy for states.
Third, for brick and mortar operations, this is unfair competition.
So it isn’t surprising that around 40 states are looking to override the precedent, with some support from lawmakers. President Trump is with the states, but that’s not the issue here.
Judges Scratching Their Heads
Some justices are going with the Trump administration (and the states), expressing concern over the financial condition of states and how they need every bit of revenue that’s owed to them.
Others are wary of the obvious problem that a change would badly hit small sellers, who have limited resources to tackle the separate tax laws across an estimated 12,000 state and local jurisdictions. A counter-argument is that if forced, suitable software would come into being that would take care of things. But whatever the case, it would drive up costs for small sellers that could include middlemen to handle the tax issue.
Another thought is that small sellers, if pushed by the law, could be driven straight to big online platforms like Amazon’s that could handle the complexity for a small fee. In the words of Justice Elena Kagan, “There’s something a little bit ironic in saying the problem with Quill is that it benefited all these companies, so now we’re going to overturn Quill so that we can benefit the exact same companies.”
The fourth argument (in support of just letting things be) is that states, upon finding no recourse in courts, have already started adopting workarounds. Online merchants in Colorado for example, are required to report their transactions so the state can collect from buyers directly, according to Justice Neil Gorsuch.
Fifth, Chief Justice John Roberts also supports status quo because since the big online retailers are already covered, it is a diminishing problem.
No Solution at This Point
Everyone realizes that the states are losing revenue, but the real question is how much. And some justices have raised the issue of limited information on how much money is at stake.
The states basically need to do a lot more homework. It’s one thing to say that a state is losing revenue to another state, but the opposite is also true: that that other state is also losing revenue at its expense. Because small sellers are there in every state. So when claiming monetary loss, the gains have to be deducted. And at the end of the day, some will obviously be making gains versus others making losses. So the problem may boil down to a difference in tax rates or value of goods instead.
Second, tax layers and rates vary across states, so there could be inequalities among states in this respect as well.
Third, the value of goods supplied can vary between states with more processed items in general having more value added. So states selling less processed goods can earn relatively less unless they charge a higher rate.
The problem arises because the current system recognizes the sale in the state in which it occurs. If all sales by a seller were simply taxed in the state of his/her residence, the problem would be solved.
Overhauling the tax law or making any changes in it is a function of the legislature and not the judiciary, which is entrusted with its interpretation only. So it’s difficult for the court to solve the problem.
Recommendations
Amazon has a Zacks Rank #1 (Strong Buy) while other players in the space like eBay, Etsy, PetMed Express have a Zacks Rank #2 (Buy). So take your pick. Or consider the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1 Stock of the Day pick for free.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.