Taxing Goods and Services in a Digital Era

David Agrawal and William Fox

National Tax Journal, 2021, vol. 74, issue 1, 257 - 301

Abstract: Taxing consumption in the digital economy poses unique challenges for fiscal authorities. Recent institutional reforms, such as states changing remittance rules for the sales and use tax following the Supreme Court decision in South Dakota v. Wayfair, were enacted to increase tax revenue collections and create a more neutral tax system. Although these reforms induced more remote vendors to remit taxes on a destination basis, the revenue gains were modest, consistent with most large online vendors remitting taxes prior to the reforms. Instead, following the recent large shock to online shopping from the COVID-19 pandemic, the shift to destination-based taxation has redistributed revenues between large and small local jurisdictions. Increased online shopping raises revenue growth in small jurisdictions while contracting revenues in large jurisdictions. But Wayfair is not the end of the story: technological changes that induce new consumption patterns promise new challenges for fiscal authorities. Critical challenges for the next decades include limiting administrative and compliance costs of enforcing taxes in a digital world, determining filing thresholds, dealing with online marketplaces and facilitators, and taxing the consumption of digital services from two-sided platforms. With respect to digital services, we discuss whether consumption taxes should be imposed on both monetized platforms and nonmonetized platforms, such as social media, and the mechanisms for doing so.

Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://dx.doi.org/10.1086/712913 (application/pdf)
http://dx.doi.org/10.1086/712913 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
Working Paper: Taxing Goods and Services in a Digital Era (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:nattax:doi:10.1086/712913

Access Statistics for this article

More articles in National Tax Journal from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().