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The 'Amazon Tax': Empirical Evidence from Amazon and Main Street Retailers

Author

Listed:
  • Baugh, Brian

    (OH State University)

  • Ben-David, Itzhak

    (OH State University)

  • Park, Hoonsuk

    (OH State University)

Abstract

Online retailers have gained a total price advantage over brick-and-mortar retailers since the formers generally are not required to collect sales tax. Recently, several states have implemented laws requiring that Amazon collect sales tax during checkout. Using transaction-level data, we document that households living in these states reduce Amazon purchases by 11%, implying an elasticity of -1.5. The effect is more pronounced for large purchases (e.g., >= $250), for which we estimate a reduction of 25% in purchases and an elasticity of -3.5. We find some weak evidence of substitution of the lost purchases towards other online and brick-and-mortar retailers.

Suggested Citation

  • Baugh, Brian & Ben-David, Itzhak & Park, Hoonsuk, 2015. "The 'Amazon Tax': Empirical Evidence from Amazon and Main Street Retailers," Working Paper Series 2014-05, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    • Handle: RePEc:ecl:ohidic:2014-05
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    Cited by:

    1. Scott R. Baker & Stephanie Johnson & Lorenz Kueng, 2021. "Shopping for Lower Sales Tax Rates," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(3), pages 209-250, July.

    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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