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American Economic Journal: Economic Policy: Vol. 1 No. 2 (August 2009)

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Tax Sensitivity and Home State Preferences in Internet Purchasing

Article Citation

Ellison, Glenn, and Sara Fisher Ellison. 2009. "Tax Sensitivity and Home State Preferences in Internet Purchasing." American Economic Journal: Economic Policy, 1(2): 53-71.

DOI: 10.1257/pol.1.2.53

Abstract

Data on memory modules sales are used to explore aspects of e-retail demand. Aggregate sales are examined in state-level regressions. Discrete choice techniques are used to examine (incomplete) hourly sales data from a price comparison site. We find a strong relationship between e-retail sales to a given state and sales tax rates that apply to purchases from offline retailers, suggesting substantial online-offline substitution and the importance of tax avoidance motives. Geography matters in two ways: consumers prefer purchasing from firms in nearby states and appear to have a separate preference for buying from in-state firms. (JEL D12, H25, H71, L81)

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Authors

Ellison, Glenn (MIT)
Ellison, Sara Fisher (MIT)

JEL Classifications

D12: Consumer Economics: Empirical Analysis
H25: Business Taxes and Subsidies including sales and value-added (VAT)
H71: State and Local Taxation, Subsidies, and Revenue
L81: Retail and Wholesale Trade; e-Commerce

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