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E-Tailer Sales Tax Nexus and State Tax Policies


  • Donald Bruce
  • William F. Fox
  • LeAnn Luna


The growth in e-commerce has dramatically altered U.S. business practices in ways that erode states’ ability to collect sales taxes. States have attempted to reclaim the sales tax base but are constrained by current nexus rules that allow firms to choose whether to establish taxability based on a decision to establish physical presence. We examine how state tax policies affect the propensity of firms to establish nexus in each state. We find that firms are more likely to have nexus in large states, and that the effect of policy on nexus decisions appears to be relatively immediate and a function of current sales tax rates and base breadth. Employment rises with nexus in states where the sales tax is low.

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  • Donald Bruce & William F. Fox & LeAnn Luna, 2015. "E-Tailer Sales Tax Nexus and State Tax Policies," National Tax Journal, National Tax Association;National Tax Journal, vol. 68(3S), pages 735-766, September.
  • Handle: RePEc:ntj:journl:v:68:y:2015:i:3s:p:735-766

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    Cited by:

    1. Shoag, Daniel & Tuttle, Cody & Veuger, Stan, 2017. "Rules versus Home Rule: Local Government Responses to Negative Revenue Shocks," Working Paper Series rwp17-037, Harvard University, John F. Kennedy School of Government.
    2. David R. Agrawal & William F. Fox, 2017. "Taxes in an e-commerce generation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(5), pages 903-926, September.
    3. Benjamin Harbolt, 2019. "Tax Avoidance through E-Commerce and Cross-Border Shopping," CESifo Working Paper Series 7814, CESifo.

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