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

54 Pages Posted: 21 Apr 2014 Last revised: 28 Apr 2014

See all articles by Brian Baugh

Brian Baugh

Univeristy of Nebraska at Lincoln (UNL) - Department of Finance

Itzhak Ben-David

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER)

Hoonsuk Park

Nanyang Technological University (NTU)

Date Written: April 2014

Abstract

For years, online retailers have maintained a price advantage over brick-and-mortar retailers by not collecting sales tax at the time of sale. Recently, several states have required that online retailer Amazon collect sales tax during checkout. Using transaction-level data, we document that households living in these states reduced Amazon purchases by 9.4% after sales tax laws were implemented, implying elasticities ranging from –1.2 to –1.4. 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 toward competing retailers.

Suggested Citation

Baugh, Brian and Ben-David, Itzhak and Park, Hoonsuk, Can Taxes Shape an Industry? Evidence from the Implementation of the “Amazon Tax” (April 2014). NBER Working Paper No. w20052. Available at SSRN: https://ssrn.com/abstract=2427154

Brian Baugh (Contact Author)

Univeristy of Nebraska at Lincoln (UNL) - Department of Finance ( email )

Lincoln, NE 68588-0490
United States

HOME PAGE: http://https://cba.unl.edu/people/bbaugh

Itzhak Ben-David

Ohio State University (OSU) - Department of Finance ( 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

Nanyang Technological University (NTU) ( email )

S3 B2-A28 Nanyang Avenue
Singapore, 639798
Singapore

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