Does Use Tax Evasion Provide a Competitive Advantage to E-tailers?
Jeffrey L. Hoopes
Ohio State University (OSU) - Department of Accounting & Management Information Systems
Jacob R. Thornock
University of Washington - Michael G. Foster School of Business
University of Texas at Austin - Department of Accounting
November 3, 2015
National Tax Journal, Forthcoming
Many online retail firms (e-tailers) do not collect sales tax from the majority of their customers, providing these firms a potential competitive advantage over traditional retailers. We examine stock market returns and analysts’ sales forecast revisions surrounding federal legislative proposals, such as the Marketplace Fairness Act, that could erode this alleged competitive advantage for e-tailers. Following events that indicated an increased likelihood of federal sales tax legislation, we find negative abnormal stock returns for e-tail firms relative to traditional retail firms. We also find that analysts forecast a future reduction in sales revenue for e-tailers. These findings imply the existence of a competitive advantage for e-tailers, which advantage will potentially diminish with the enactment of federal sales tax legislation.
Number of Pages in PDF File: 44
Keywords: Sales tax, Marketplace Fairness Act
JEL Classification: H20, H25, H29, G14, G18
Date posted: March 3, 2014 ; Last revised: November 11, 2015
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