Is Sales Tax Avoidance a Competitive Advantage?
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 Washington - Foster School of Business
June 13, 2014
Many online retail firms (i.e., 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. We find negative abnormal stock returns for e-tail firms relative to traditional retail firms, and find that analysts forecast a future reduction in sales revenue for e-tailers, following events that indicated an increased likelihood of federal sales tax legislation. 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: 40
Keywords: Sales tax, Marketplace Fairness Act
Date posted: March 3, 2014 ; Last revised: July 12, 2014
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