Analysts Warn Against eBay Stock Post-'Wayfair’(1)

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By Ryan Prete

A U.S. Supreme Court ruling allowing states to tax online sales has stock analysts at one firm advising clients not to push e-retailer eBay Inc.'s stock.

Analysts at SunTrust Robinson Humphrey, a financial advisory firm, told clients in a July 10 report that the firm would be downgrading eBay’s stock to hold from buy because of the high court’s ruling in South Dakota v. Wayfair. However, not all state tax professionals are in agreement over the report.

In South Dakota v. Wayfair, Justice Anthony Kennedy led a 5-4 majority in throwing out the court’s divisive 1992 rule in Quill Corp. v. North Dakota.Quill, which states like the petitioning South Dakota for years have tried to “kill” through lawsuits and regulation, prohibited states from imposing sales tax collection obligations on vendors lacking an in-state physical presence.

The majority in Wayfair suggested strongly that South Dakota’s law would pass constitutional muster; the state’s model imposes the tax collection threshold at 200 separate transactions or $100,000 in in-state sales. But the court stopped short of formally declaring that South Dakota’s law, which dozens of states have mimicked already, was valid in the absence of Quill. The court just made clear that Quill was no longer part of any commerce clause test for when states may impose taxes.

The analysts said the company made the decision to downgrade eBay’s stock “following SCOTUS’ decision to reverse a 1992 e-commerce precedent, and prospects for similar headwinds overseas.”

“To protect its turf and prevent small businesses from seeking alternative solutions, eBay needs to partner for/or acquire the systems and tools to be able to track, collect and remit state and local taxes in an efficient and timely manner,” the report said.

Penny Bruce, director of corporate communication at eBay, said the company wouldn’t comment on the report.

As of market close on July 10, eBay’s stock was down 2.29 percent.

Incorrect Report?

The analysts’ concern isn’t shared by all members of the state and local tax community.

“This report is very out of the blue, and I’m not sure the report is accurate,” Mark Nebergall, president of the Software Finance & Tax Executives Council (SoFTEC), told Bloomberg Tax.

Nebergall said the analysts might be confused when stating that eBay must work to partner with a tax software compliance company, when multiple states—Connecticut, Minnesota, Oklahoma, Pennsylvania, Rhode Island, and Washington—have already enacted marketplace provider provisions that require Amazon-type sellers to collect sales tax on third-party transactions conducted on their platforms.

“Washington’s marketplace provider law is already in effect, which means that eBay would already have to be collecting on third-party sales in that state, and would already have some sort of compliance software handy,” Nebergall said.

Nebergall also said it’s likely that eBay is already collecting sales and use taxes on non-third-party sales in most states. This is true of e-commerce giant Inc., which has collected sales tax in every relevant state since early last year.

Ebay Against ‘Wayfair’ Ruling

Ebay has been one of the few e-retailers to lash out against the high court’s June 21 Wayfair ruling.

Shortly after the ruling, Ebay released a statement urging “Congress to step in and provide clear tax rules, with a strong small business exemption, to help small businesses take advantage of the Internet to grow and create local jobs.”

“The Court was very clear about the importance of protecting small businesses from unfair burdens,” the company said. “If state tax authorities attempt to subject remote small businesses to audits and lawsuits, there will be increased litigation across the country to protect small business from unfair burdens.”

With assistance from Kristine Owram in Toronto (Bloomberg)

To contact the reporter on this story: Ryan Prete in Washington at

To contact the editor responsible for this story: Ryan C. Tuck at

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