Sales Taxes and Internet Commerce
AbstractWe estimate the sensitivity of Internet retail purchasing to sales taxes using data from the eBay marketplace. Our Örst approach exploits the fact that seller locations are revealed only after buyers have expressed interest in an item by clicking on its listing. We use millions of location surprises to estimate price elasticities with respect to the e§ective sales tax. We then use aggregated data to estimate cross-state substitution parameters, and substitution between o ine and online purchases, relying on the variation in state and local sales taxes, and on changes in these rates over time. We Önd substantial sensitivity to sales taxes. Using our item-level approach, we Önd a price elasticity of around -2 for interested buyers. Using our aggregate approach, we Önd that a one percentage point increase in a stateís sales tax increases online purchases by state residents by just under two percent, but decreases their online purchases from home-state retailers by 3-4 percent.
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Bibliographic InfoPaper provided by Stanford Institute for Economic Policy Research in its series Discussion Papers with number 11-012.
Date of creation: Apr 2012
Date of revision:
Other versions of this item:
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
- L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Liran Einav & Theresa Kuchler & Jonathan Levin & Neel Sundaresan, 2011.
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2009-11, Board of Governors of the Federal Reserve System (U.S.).
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07-002, Stanford Institute for Economic Policy Research.
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- Austan Goolsbee & Michael Lovenheim & Joel B. Slemrod, 2009. "Playing With Fire: Cigarettes, Taxes and Competition From the Internet," NBER Working Papers 15612, National Bureau of Economic Research, Inc.
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- Sumit Agarwal & Leslie McGranahan, 2012. "Spending responses to state sales tax holidays," Working Paper Series WP-2012-10, Federal Reserve Bank of Chicago.
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