Sales Taxes and Internet Commerce
- (pp. 1-26)
Abstract
We estimate the sensitivity of Internet retail purchasing to sales taxes using eBay data. Our first approach exploits the fact that a seller's location—and therefore the applicable tax rate—is revealed only after a buyer has expressed interest in an item. We document how adverse tax "surprises" reduce the likelihood of purchase and shift subsequent purchases toward out-of-state sellers. We then use more aggregated data to estimate that every one percentage point increase in a state's sales tax increases online purchases by state residents by almost 2 percent, while decreasing their online purchases from state retailers by 3–4 percent.Citation
Einav, Liran, Dan Knoepfle, Jonathan Levin, and Neel Sundaresan. 2014. "Sales Taxes and Internet Commerce." American Economic Review, 104 (1): 1-26. DOI: 10.1257/aer.104.1.1Additional Materials
JEL Classification
- H71 State and Local Taxation, Subsidies, and Revenue
- L81 Retail and Wholesale Trade; e-Commerce
- L86 Information and Internet Services; Computer Software