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A world without borders revisited: Impact of online sales tax collection on shopping and search

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  • Mallick Hossain

Abstract

For years, online retailers did not have to collect sales taxes at the time of sale. Over the past decade, states have passed laws to capture this lost revenue. I study the effect of closing the online sales tax loophole on online spending and search. Using online shopping data, sales taxes, and Amazon's staggered sales tax collection, I estimate that a household's tax elasticity is −1.9, implying a 13% decline in Amazon's revenues upon sales tax collection. After Amazon collects sales taxes, households increase their spending on Amazon's taxed competitors, but not its untaxed competitors. I find no evidence that households change their search behavior or shift their spending offline. Collecting sales taxes online will help governments recapture lost taxes and increase online competition, but will not shift customers back offline.

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  • Mallick Hossain, 2022. "A world without borders revisited: Impact of online sales tax collection on shopping and search," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(1), pages 48-63, February.
    • Handle: RePEc:bla:jemstr:v:31:y:2022:i:1:p:48-63
    DOI: 10.1111/jems.12453
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    References listed on IDEAS

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    1. Sumit Agarwal & Nathan Marwell & Leslie McGranahan, 2017. "Consumption Responses to Temporary Tax Incentives: Evidence from State Sales Tax Holidays," American Economic Journal: Economic Policy, American Economic Association, vol. 9(4), pages 1-27, November.
    2. Brian Baugh & Itzhak Ben‐David & Hoonsuk Park, 2018. "Can Taxes Shape an Industry? Evidence from the Implementation of the “Amazon Tax”," Journal of Finance, American Finance Association, vol. 73(4), pages 1819-1855, August.
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    Cited by:

    1. Chung, Jamie, 2023. "The spillover effect of E-commerce on local retail real estate markets," Regional Science and Urban Economics, Elsevier, vol. 101(C).

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