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E-Tailer Sales Tax Nexus and State Tax Policies

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  • Donald Bruce
  • William F. Fox
  • LeAnn Luna

Abstract

The growth in e-commerce has dramatically altered U.S. business practices in ways that erode states’ ability to collect sales taxes. States have attempted to reclaim the sales tax base but are constrained by current nexus rules that allow firms to choose whether to establish taxability based on a decision to establish physical presence. We examine how state tax policies affect the propensity of firms to establish nexus in each state. We find that firms are more likely to have nexus in large states, and that the effect of policy on nexus decisions appears to be relatively immediate and a function of current sales tax rates and base breadth. Employment rises with nexus in states where the sales tax is low.

Suggested Citation

  • Donald Bruce & William F. Fox & LeAnn Luna, 2015. "E-Tailer Sales Tax Nexus and State Tax Policies," National Tax Journal, National Tax Association;National Tax Journal, vol. 68(3S), pages 735-766, September.
    • Handle: RePEc:ntj:journl:v:68:y:2015:i:3s:p:735-766
    DOI: 10.17310/ntj.2015.3S.02
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    File URL: https://doi.org/10.17310/ntj.2015.3S.02
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    Citations

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    Cited by:

    1. David R. Agrawal & Aline Bütikofer, 2022. "Public finance in the era of the COVID-19 crisis," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(6), pages 1349-1372, December.
    2. James Alm, 2021. "Tax evasion, technology, and inequality," Economics of Governance, Springer, vol. 22(4), pages 321-343, December.
    3. David R. Agrawal & William F. Fox, 2021. "Taxing Goods and Services in a Digital Era," National Tax Journal, University of Chicago Press, vol. 74(1), pages 257-301.
    4. Agrawal, David R. & Shybalkina, Iuliia, 2023. "Online shopping can redistribute local tax revenue from urban to rural America," Journal of Public Economics, Elsevier, vol. 219(C).
    5. 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).
    6. Daniel Shoag & Cody Tuttle & Stan Veuger, 2019. "Rules Versus Home Rule—Local Government Responses to Negative Revenue Shocks," National Tax Journal, National Tax Association;National Tax Journal, vol. 72(3), pages 543-574, September.
    7. 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.
    8. Alan A. Ahi & Noemi Sinkovics & Rudolf R. Sinkovics, 2023. "E-commerce Policy and the Global Economy: A Path to More Inclusive Development?," Management International Review, Springer, vol. 63(1), pages 27-56, February.
    9. Benjamin Harbolt, 2019. "Tax Avoidance through E-Commerce and Cross-Border Shopping," CESifo Working Paper Series 7814, CESifo.
    10. Wang, Lingxiao & Zheng, Yuqing, 2024. "Why are grocery foods taxed in the United States? Theory and spatial evidence from multilevel government interactions," Regional Science and Urban Economics, Elsevier, vol. 104(C).
    11. 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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