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Optimal Commodity Taxation of Traditional and Electronic Commerce

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  • Zodrow, George R.

Abstract

This paper examines theoretical arguments supporting preferential sales tax treatment of electronic commerce, using a version of the standard optimal commodity tax model that includes distributional concerns, tax–exempt goods, a subset of individuals with highly elastic demand for Internet goods (which are close but imperfect substitutes for similar goods sold by traditional retailers), and relatively high administrative costs of taxing electronic commerce. The analysis concludes that tax exemption of electronic commerce is unlikely to be even close to optimal, with the optimal tax differentials calculated suggesting that the traditional prescription of uniform taxation of traditional and electronic commerce should not be overridden by optimal taxation concerns.

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  • Zodrow, George R., 2006. "Optimal Commodity Taxation of Traditional and Electronic Commerce," National Tax Journal, National Tax Association;National Tax Journal, vol. 59(1), pages 7-31, March.
    • Handle: RePEc:ntj:journl:v:59:y:2006:i:1:p:7-31
    DOI: 10.17310/ntj.2006.1.01
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    Cited by:

    1. James Mak, 2012. "Taxing Hotel Room Sales by Online Travel Companies: What Should Be the Appropriate Tax Base?," Working Papers 2012-5R, University of Hawaii Economic Research Organization, University of Hawaii at Manoa, revised Aug 2012.
    2. Beem, Richard & Bruce, Donald, 2021. "Failure to launch: Measuring the impact of sales tax nexus standards on business activity," Journal of Public Economics, Elsevier, vol. 201(C).
    3. David R. Agrawal & William F. Fox, 2017. "Taxes in an e-commerce generation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(5), pages 903-926, September.
    4. Květa Kubátová, 2009. "Optimal Taxation - Review of Theory [Optimální zdanění - přehled dosavadní teorie]," Český finanční a účetní časopis, Prague University of Economics and Business, vol. 2009(3), pages 24-36.
    5. Fox, William F. & Hargaden, Enda Patrick & Luna, LeAnn, 2022. "Statutory incidence and sales tax compliance: Evidence from Wayfair," Journal of Public Economics, Elsevier, vol. 213(C).

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