Abstract

http://ssrn.com/abstract=2422403
 


 



Can Taxes Shape an Industry? Evidence from the Implementation of the 'Amazon Tax'


Brian Baugh


Ohio State University (OSU) - Fisher College of Business

Itzhak Ben-David


Ohio State University - Fisher College of Business, Finance Department; National Bureau of Economic Research (NBER)

Hoonsuk Park


Ohio State University (OSU) - Fisher College of Business

July 2016

Fisher College of Business Working Paper No. 2014-03-05
Charles A. Dice Center Working Paper No. 2014-05

Abstract:     
Online retailers have maintained a price advantage over brick-and-mortar retailers since have not collected sales tax at the time of sale. Recently, several states have required that the online retailer Amazon collect sales tax during checkout. Using transaction-level data, we document that households living in these states reduce Amazon purchases by 9.4% after sales taxes were implemented, implying an elasticity of –1.2. The effect is more pronounced for large purchases, for which we estimate a reduction of 29.1% in purchases corresponding to an elasticity of –3.9. Studying competitors in the electronics field, we detect some evidence of substitution of the lost purchases towards competing retailers. Consistent with an income effect, we find that after implementation of the Amazon tax, heavy Amazon shoppers reduce spending in the categories of gas, restaurants, entertainment, and travel.

Number of Pages in PDF File: 51

Keywords: Amazon Tax, price elasticity, sales tax, internet commerce

JEL Classification: D12, D40, L51


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Date posted: April 10, 2014 ; Last revised: August 11, 2016

Suggested Citation

Baugh, Brian and Ben-David, Itzhak and Park, Hoonsuk, Can Taxes Shape an Industry? Evidence from the Implementation of the 'Amazon Tax' (July 2016). Fisher College of Business Working Paper No. 2014-03-05; Charles A. Dice Center Working Paper No. 2014-05. Available at SSRN: http://ssrn.com/abstract=2422403 or http://dx.doi.org/10.2139/ssrn.2422403

Contact Information

Brian Baugh
Ohio State University (OSU) - Fisher College of Business ( email )
2100 Neil Avenue
Columbus, OH 43210-1144
United States

Itzhak Ben-David (Contact Author)
Ohio State University - Fisher College of Business, Finance Department ( email )
2100 Neil Avenue
Fisher 700D
Columbus, OH 43210-1144
United States
773 988 1353 (Phone)
HOME PAGE: http://fisher.osu.edu/fin/faculty/Ben-David/index.htm

National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
HOME PAGE: http://fisher.osu.edu/fin/faculty/Ben-David/
Hoonsuk Park
Ohio State University (OSU) - Fisher College of Business ( email )
2100 Neil Avenue
Columbus, OH 43210-1144
United States

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