Working Paper: NBER ID: w20052
Authors: Brian Baugh; Itzhak Bendavid; Hoonsuk Park
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.
Keywords: Amazon tax; sales tax; consumer behavior; elasticity; online retail
JEL Codes: D12; D40; L51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Amazon tax (H26) | consumer behavior (D19) |
| Amazon tax (H26) | Amazon expenditures (L81) |
| Amazon tax (H26) | spending on transactions of at least $250 (H76) |
| Amazon tax (H26) | low-income household spending (D12) |
| Amazon tax (H26) | high-income household spending (D12) |
| Amazon tax (H26) | spending at NewEgg (D12) |
| sales tax increase (H29) | tax-exclusive Amazon spending (H26) |