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Cross-Border Shopping and the Sales Tax: An Examination of Food Purchases in West Virginia

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Author Info

  • Tosun Mehmet S

    ()
    (University of Nevada, Reno)

  • Skidmore Mark L

    ()
    (Michigan State University)

Abstract

In this article we present new evidence of cross-border shopping in response to sales taxation. While several instructive studies provide estimates of the cross-border shopping effect, we utilize a unique opportunity to evaluate the effect of a large discrete change in sales tax policy. Using county level data on food sales and sales tax rates for West Virginia over the 1988-1991 period we estimate that for every one-percentage point increase in the county relative price ratio due to the sales tax change, per capita food sales decreased by about 1.38 percent. Our estimates indicate that food sales fell in West Virginia border counties by about eight percent as a result of the imposition of the six percent sales tax on food at the beginning of 1990.

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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 7 (2007)
Issue (Month): 1 (December)
Pages: 1-20

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Handle: RePEc:bpj:bejeap:v:7:y:2007:i:1:n:63

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Cited by:
  1. Davis, Lucas W., 2011. "The Effects Of Preferential Vat Rates Near International Borders: Evidence From Mexico," National Tax Journal, National Tax Association, vol. 64(1), pages 85-104, March.
  2. David Agrawal, 2014. "Lost in America: Evidence on Local Sales Taxes from National Panel Data," CESifo Working Paper Series 4943, CESifo Group Munich.
  3. David Agrawal, 2012. "Games within borders: are geographically differentiated taxes optimal?," International Tax and Public Finance, Springer, Springer, vol. 19(4), pages 574-597, August.
  4. Andrés Leal & Julio López-Laborda & Fernando Rodrigo, 2010. "Cross-Border Shopping: A Survey," International Advances in Economic Research, Springer, Springer, vol. 16(2), pages 135-148, May.
  5. James Alm & Mikhail I. Melnik, 2012. "Does Online Cross-border Shopping Affect State Use Tax Liabilities?," Working Papers, Tulane University, Department of Economics 1206, Tulane University, Department of Economics.
  6. Leal, Andrés & López-Laborda, Julio & Rodrigo, Fernando, 2009. "Prices, taxes and automotive fuel cross-border shopping," Energy Economics, Elsevier, Elsevier, vol. 31(2), pages 225-234.

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