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Sales Taxes and the Decision to Purchase Online

Author

Listed:
  • James Alm

    (Georgia State University)

  • Mikhail I. Melnik

    (Georgia State University)

Abstract

Current tax treatment of online business-to-consumer transactions may be one of the factors behind rapidly growing e-commerce. In this article, the authors examine the impact of state sales taxes on the consumer decision to conduct shopping online, using comprehensive data representative of the U.S. population. The estimation results demonstrate that there exists a direct relationship between the state sales tax rate and consumer participation in e-commerce. However, although statistically significant, this effect is relatively small. The estimates indicate that a 1 percent increase in the tax price leads to only a 0.5 percent decline in the probability of participation in online commerce.

Suggested Citation

  • James Alm & Mikhail I. Melnik, 2005. "Sales Taxes and the Decision to Purchase Online," Public Finance Review, , vol. 33(2), pages 184-212, March.
  • Handle: RePEc:sae:pubfin:v:33:y:2005:i:2:p:184-212
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    References listed on IDEAS

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    1. Marilyn Young & Michael Reksulak & William F. Shughart, 2001. "The Political Economy of the IRS," Economics and Politics, Wiley Blackwell, vol. 13(2), pages 201-220, July.
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    Cited by:

    1. Christian Baker & Jeremy Bejarano & Richard W. Evans & Kenneth L. Judd & Kerk L. Phillips, 2014. "A Big Data Approach to Optimal Sales Taxation," BYU Macroeconomics and Computational Laboratory Working Paper Series 2014-03, Brigham Young University, Department of Economics, BYU Macroeconomics and Computational Laboratory.
    2. Steel, Will & Daglish, Toby & Marriott, Lisa & Gemmell, Norman & Howell, Bronwyn, 2013. "E-Commerce and its effect upon the Retail Industry and Government Revenue," Working Paper Series 4333, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    3. Ishuan Li & Robert Simonson & Guncha Babajanova & Matthew Tuomala, 2016. "Smartphone Diffusion and Consumer Price Comparison Shopping Behavior: Implications for the Marketplace Fairness Act," Economics Bulletin, AccessEcon, vol. 36(3), pages 1337-1353.
    4. Liran Einav & Dan Knoepfle & Jonathan Levin & Neel Sundaresan, 2014. "Sales Taxes and Internet Commerce," American Economic Review, American Economic Association, vol. 104(1), pages 1-26, January.
    5. Hu, Yu Jeffrey & Tang, Zhulei, 2014. "The impact of sales tax on internet and catalog sales: Evidence from a natural experiment," International Journal of Industrial Organization, Elsevier, vol. 32(C), pages 84-90.
    6. Birg, Laura, 2015. "Cross-border or online: Tax competition with mobile consumers under destination and origin principle," Center for European, Governance and Economic Development Research Discussion Papers 265, University of Goettingen, Department of Economics.
    7. repec:kap:iaecre:v:16:y:2010:i:2:p:135-148 is not listed on IDEAS
    8. Jean-François Houde & Peter Newberry & Katja Seim, 2017. "Economies of Density in E-Commerce: A Study of Amazon’s Fulfillment Center Network," NBER Working Papers 23361, National Bureau of Economic Research, Inc.
    9. Andrés Leal & Julio López-Laborda & Fernando Rodrigo, 2010. "Cross-Border Shopping: A Survey," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 16(2), pages 135-148, May.
    10. Brian Baugh & Itzhak Ben-David & Hoonsuk Park, 2014. "Can Taxes Shape an Industry? Evidence from the Implementation of the “Amazon Tax”," NBER Working Papers 20052, National Bureau of Economic Research, Inc.
    11. Leal, Andrés & López-Laborda, Julio & Rodrigo, Fernando, 2009. "Prices, taxes and automotive fuel cross-border shopping," Energy Economics, Elsevier, vol. 31(2), pages 225-234.
    12. Alm, James & Melnik, Mikhail I., 2010. "Do Ebay Sellers Comply With State Sales Taxes?," National Tax Journal, National Tax Association, pages 215-236.
    13. Ballard, Charles L. & Lee, Jaimin, 2007. "Internet Purchases, Cross-Border Shopping, and Sales Taxes," National Tax Journal, National Tax Association, vol. 60(4), pages 711-725, December.

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    Keywords

    sales taxes; Internet taxation; e-commerce;

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