Cross-border Shopping and State Use Tax Liabilities: Evidence from eBay Transactions
AbstractOnline commerce presents consumers with a convenient way of shopping outside of their local jurisdiction, and this online purchase decision is capable of affecting in significant ways the sales and use tax collections of state governments. However, the actual revenue impact has proven difficult to estimate. There is considerable work that examines the revenue impact of seller compliance with sales taxes. However, there is little work on buyer compliance with use taxes. In this paper we investigate the potential impact of cross-border shopping on state use tax liabilities of buyers, using data from the largest online consumer-to-consumer and business-to-consumer marketplace, eBay.com. We collect our own data on actual cross-border shopping transactions from eBay, focusing upon a "representative" commodity classification and a "typical" day; these data consist of nearly twenty-one thousand eBay listings generated by roughly seven thousand individual sellers with over nine thousand buyers. These data allow us to examine the extent of actual, not estimated, cross-border shopping by buyers, and the subsequent potential impact of this cross-border shopping on state use tax liabilities. Our results indicate that cross-border shopping is highly prevalent on eBay, with out-of-state purchases accounting for on average 94 percent of the volume of a state's purchase transactions. Even so, given the limited volume of eBay-based transactions relative to total sales transactions, the likely impact of cross-border transactions on state use tax revenue streams is quite low, at least at present, typically less than one percent of actual state sales tax revenues.
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Bibliographic InfoPaper provided by Tulane University, Department of Economics in its series Working Papers with number 1205.
Length: 32 pages
Date of creation: Jul 2012
Date of revision:
online commerce; sales taxes; nexus; tax evasion;
Find related papers by JEL classification:
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
- H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-08-23 (All new papers)
- NEP-IUE-2012-08-23 (Informal & Underground Economics)
- NEP-MKT-2012-08-23 (Marketing)
- NEP-PBE-2012-08-23 (Public Economics)
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- James Alm & Mikhail I. Melnik, 2012. "Does Online Cross-border Shopping Affect State Use Tax Liabilities?," Working Papers 1206, Tulane University, Department of Economics.
- James Alm & Keith Finlay, 2013.
"Who Benefits from Tax Evasion?,"
Economic Analysis and Policy (EAP),
Queensland University of Technology (QUT), School of Economics and Finance, vol. 43(2), pages 139-154, September.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Keith Finlay).
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