Does Use Tax Evasion Provide a Competitive Advantage to E-tailers?

44 Pages Posted: 3 Mar 2014 Last revised: 11 Nov 2015

Jeffrey L. Hoopes

University of North Carolina (UNC) at Chapel Hill

Jacob R. Thornock

Brigham Young University

Braden Williams

University of Texas at Austin - Department of Accounting

Date Written: November 3, 2015

Abstract

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.

Keywords: Sales tax, Marketplace Fairness Act

JEL Classification: H20, H25, H29, G14, G18

Suggested Citation

Hoopes, Jeffrey L. and Thornock, Jacob R. and Williams, Braden, Does Use Tax Evasion Provide a Competitive Advantage to E-tailers? (November 3, 2015). National Tax Journal, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2403952 or http://dx.doi.org/10.2139/ssrn.2403952

Jeffrey L. Hoopes (Contact Author)

University of North Carolina (UNC) at Chapel Hill ( email )

102 Ridge Road
Chapel Hill, NC NC 27514
United States

Jacob Thornock

Brigham Young University ( email )

Provo, UT 84602
United States
8014220828 (Phone)

Braden Williams

University of Texas at Austin - Department of Accounting ( email )

Austin, TX 78712
United States

Paper statistics

Downloads
389
Rank
60,222
Abstract Views
2,874