THE LAW IS ALWAYS ONE STEP BEHIND

Since 2008 Walmart ($WMT) has paid 46x more in income tax than Amazon ($AMZN). That is a crazy stat and the link (source: Axios) is worth a read. But there's more to the Amazon tax story than that: it seems that the United States Supreme Court has contributed to the rise of Amazon and the rise of the "Amazon Effect." 

Here's the condensed version:

• In 1992, the Supreme Court ruled in favor of a mail-order vendor over the state of North Dakota in a dispute over the collection of sales taxes. The case was Quill Corp. v. North Dakota. Why? Taxing the vendor would "unduly burden interstate commerce." The Court ruled that taxation would only apply to retailers with a "physical presence" in states. 
• There's a ton of discussion about the "last mile" now - a reflection of just how much retail continues to evolve - but this ruling impacted corporate decisions in a big way for a long time: why locate a warehouse in the same state as the lion-share of customers and suffer a higher tax burden? 
• Amazon avoided having any fulfillment center in California FOR 17 YEARS to avoid sales taxes. Overstock ($OSTK) and Wayfair ($W) STILL limit their distribution centers for this reason. (Now Amazon collects in all 50 states.)
• The decision looks headed for re-evaluation. In what looks like a purposeful strategy to test the precedent, South Dakota lawmakers passed a law requiring businesses to collect state sales taxes on sales of goods over $100k - even if those businesses have no presence in SD. South Dakota's highest court held that the law violates Quill. 
• So what's next? Looks like the lawyers are primed to petition for certiorari to the Supreme Court with the hope of a reversal of Quill. A reversal could help take some cash off of corporate balance sheets (see chart below) and fill state coffers. This could help counter-balance state budget ills, including underfunded pensions (see below). On the flip side, it may stifle e-commerce startup growth which, in a stroke of irony, may actually benefit Amazon further. Don't hate the player, hate the game...or something.