Sales Taxes and Internet Commerce
Type:
SIEPR Discussion Paper 11-012
Publisher:
Liran Einav, Dan Knoepfle, Jonathan Levin and Neel Sundaresan
Author(s):
Published:
04/17/12
Abstract:
We estimate the sensitivity of Internet retail purchasing to sales
taxes using data from the eBay marketplace. Our Örst approach exploits the fact
that seller locations are revealed only after buyers have expressed interest in an
item by clicking on its listing. We use millions of location ìsurprisesîto estimate
price elasticities with respect to the e§ective sales tax. We then use aggregated
data to estimate cross-state substitution parameters, and substitution between
o ine and online purchases, relying on the variation in state and local sales taxes,
and on changes in these rates over time. We Önd substantial sensitivity to sales
taxes. Using our item-level approach, we Önd a price elasticity of around -2 for
interested buyers. Using our aggregate approach, we Önd that a one percentage
point increase in a stateís sales tax increases online purchases by state residents
by just under two percent, but decreases their online purchases from home-state
retailers by 3-4 percent.
By:
Liran Einav, Dan Knoepfle, Jonathan Levin and Neel Sundaresan
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