No Longer a Tax Haven? The Impact of Taxes on Internet Purchase Behavior
University of Maryland
Nicholas H. Lurie
University of Connecticut School of Business
September 10, 2008
Using the online transaction data of 88,814 U.S. households in 2006, we analyze how local tax rates affect online purchasing behavior. Although earlier survey-based research has found that consumers who live in high-tax localities are more likely to shop online, our transaction-based data show the opposite. We find that higher local tax rates are associated with lower online expenditures, reduced transaction frequency, and a lower probability of making an online purchase. A disaggregate analysis shows that increased sales tax does not significantly boost demand from tax avoiding retailers but significantly lowers demand for online retailers that collect tax. In addition online shoppers are more than twice as sensitive to tax as traditional store shoppers. Finally, we document that tax losses from Internet sales are more moderate than previously estimated.
Number of Pages in PDF File: 35
Keywords: Internet, e-commerce, tax, public policyworking papers series
Date posted: September 11, 2008
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo3 in 4.422 seconds