Tax Bite Imperils Amazon

Wall Street may be on board, but it's Washington, D.C., that could hold pitfalls for Amazon.comAMZN.

Shares of the Web retailer have soared 60% to $71.17 since it announced a blowout quarter in April. But investors piling into the stock should be aware that the company -- and its stock -- could be facing new legislative headwinds.

A new piece of legislation seeks to have online retailers collect state sales taxes from certain customers. The companies have avoided paying these taxes until now, allowing them to pass along the discounts to their customers.

And while legislation to have online retailers collect these taxes isn't entirely new, recent events have boosted the chances that the bill becomes law this time around.

That could introduce an unexpected hitch for a retailing giant such as Amazon, which trades at a lofty valuation of 55.6 times forward 12-month earnings. GoogleGOOG shares, by comparison, trade at a P/E ratio of 26.5, while AppleAAPL trades at 29.7.

On May 22, Sen. Mike Enzi of Wyoming introduced new legislation that would make big e-commerce players like Amazon collect additional sales tax. Existing laws allow Web retailers to avoid paying taxes in states where they don't have a physical presence, even though they do business with residents of such states.

The value of the tax statute has not been lost on Amazon, which scaled back its distribution centers by nearly half since it was first founded.