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Tax Avoidance through E-Commerce and Cross-Border Shopping

Benjamin Harbolt

No 7814, CESifo Working Paper Series from CESifo Group Munich

Abstract: As e-commerce has grown over the last few decades so has states' concern for its use for sales tax avoidance. Using a panel of Washington State tax jurisdictions from 2005 through 2015, I estimate the effect of a sales tax regime change on the elasticities of taxable sales. I find the regime change, targeted at reducing sales tax avoidance through remote purchases, had a differential impact that varied by tax jurisdiction. I find that in tax jurisdictions near the border of lower-sales-tax states (Oregon and Idaho) consumers became more responsive to the difference in sales tax rates across borders than their counterparts in the interior of the state. I interpret this as a substitution by consumers along the Oregon and Idaho border from e-commerce purchases to cross-border shopping in order to avoid sales taxes.

Keywords: sales tax avoidance; destination-based taxation; cross-border shopping (search for similar items in EconPapers)
JEL-codes: H26 H71 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int, nep-pbe, nep-pub and nep-ure
Date: 2019
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