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Can Taxes Shape an Industry? Evidence from the Implementation of the “Amazon Tax”
Author(s) -
BAUGH BRIAN,
BENDAVID ITZHAK,
PARK HOONSUK
Publication year - 2018
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/jofi.12687
Subject(s) - competitor analysis , amazon rainforest , business , database transaction , elasticity (physics) , transaction data , commerce , industrial organization , monetary economics , economics , marketing , ecology , materials science , computer science , composite material , biology , programming language
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 their Amazon purchases by 9.4% following the implementation of the sales tax laws, implying elasticities of –1.2 to –1.4. The effect is stronger for large purchases, where purchases declined by 29.1%, corresponding to an elasticity of –3.9. Studying competitors in the electronics field, we find some evidence of substitution toward competing retailers.