Shares in several online retailers have fallen on the news of a recent US Supreme Court decision that could potentially see them facing larger tax bills.
On June 21, the court voted to overturn a 1992 physical presence requirement, which would now allow states in the US to collect an extra US$8-23bn a year in sales taxes.
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The current system means that local rates are applied at check-out where a company has a presence, be it a store, distribution centre or office. The proposed change to the regime means that in future states will be able to charge their own sales tax.
Analysts at City broker Liberum cautioned on the potential impact of the new regime: “Not only could this cause a change in current sales tax rates it adds additional unforeseen risks. While companies don’t disclose sales by region, we do expect potential different impacts across our coverage universe: in summary, no impact for Ted Baker, Joules, and Naked Wines, an immaterial impact for Boohoo and a modest but workable impact for ASOS.”
The sentiment was echoed by analysts at Barclays, who said that the sales tax ruling was “a headwind, but not disastrous”.
Regarding specific retailers, Liberum’s analysts said they expected around a 5% blended increase in ASOS plc’s (LON:ASC) US tax rate, with a potential headwind in the “high single digit millions”.
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For Boohoo.com PLC (LON:BOO), analysts expected an immaterial headwind due to a lower sales exposure for the region, in addition to estimating little impact for Ted Baker PLC (LON:TED) and Joules Group PLC (LON:JOUL).
The markets were taking the news predictably, with shares in ASOS dropping 4.8% to 6,286p, shares in Boohoo falling 3% to 199.5p, and shares in Joules down 0.9% at 363p in early morning trading Friday.
The one outlier was Ted Baker, whose shares were up 2.9% at 2,242p.