Can Taxes Shape an Industry? Evidence from the Implementation of the “Amazon Tax”
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.
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Copy CitationBrian Baugh, Itzhak Ben-David, and Hoonsuk Park, "Can Taxes Shape an Industry? Evidence from the Implementation of the “Amazon Tax”," NBER Working Paper 20052 (2014), https://doi.org/10.3386/w20052.Download Citation
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Published Versions
BRIAN BAUGH & ITZHAK BEN-DAVID & HOONSUK PARK, 2018. "Can Taxes Shape an Industry? Evidence from the Implementation of the “Amazon Tax”," The Journal of Finance, vol 73(4), pages 1819-1855. citation courtesy of 
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