Local Sales Tax, Cross-Border Shopping, and Travel Cost

42 Pages Posted: 2 Apr 2016 Last revised: 24 Nov 2017

See all articles by Iksoo Cho

Iksoo Cho

Government of the State of Nebraska - Department of Revenue

Date Written: March 29, 2016

Abstract

This paper uses Nebraska sales tax data to estimate the magnitude of cross-border shopping in response to travel cost when a local sales tax changes. The results indicate that a one percent increase in a local sales tax induces cross-border shopping by 4.81 percent in a city that has an adjacent city; 1.87 percent in a city that is a 20-minute drive away from a neighboring city. The results also imply that the incentive of cross-border shopping would virtually disappear in a city that is more than a 53-minute drive away from a neighboring city.

Keywords: sales tax, cross-border shopping, distance, local taxes

JEL Classification: D12, H25, H31, H71, R12

Suggested Citation

Cho, Iksoo, Local Sales Tax, Cross-Border Shopping, and Travel Cost (March 29, 2016). Available at SSRN: https://ssrn.com/abstract=2756208 or http://dx.doi.org/10.2139/ssrn.2756208

Iksoo Cho (Contact Author)

Government of the State of Nebraska - Department of Revenue ( email )

NE
United States

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