Professor Levin’s paper, “Sales Taxes and Internet Commerce,” looks at sales tax with online sales from a few angles. First, it asks how taxing online retail purchases affect off-line retail sales – is there a shift to off-line retail after an increase in tax? His research then looks at how state differences in taxes affect in-state retail sales.
Professor Levin uses two approaches in his paper. In the first approach, the paper uses the “tax surprise” on eBay where the buyer only finds out “late”, i.e., after clicking on an item, where the retailer is located and whether state taxes will be imposed. Using eBay data, Professor Levin and his researchers find that the purchasing rate of in-state buyers is indeed lower than for out-of-state buyers. In the second approach, they use more aggregated data and look at state-to-state trade flows. They find that a 1 percent increase in a state’s sales tax leads to an increase in online purchases by state residents by 2 percent, but also to a decrease in online purchases by state residents from home-state retailers by 3-4 percent. Thus the increase in online purchases is seen moving to out-of-state retailers.
During the TNIT conference, TAP sat down with Professor Levin to discuss this latest work. Watch video
The Toulouse Network for Information Technology was created in 2005 to encourage some of the best academic economists in the world to engage in the issues generated by the rapid development of information technology.