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Sales Taxes and the Decision to Purchase Online

Author

Listed:
  • James Alm

    (Georgia State University)

  • Mikhail I. Melnik

    (Georgia State University)

Abstract

Current tax treatment of online business-to-consumer transactions may be one of the factors behind rapidly growing e-commerce. In this article, the authors examine the impact of state sales taxes on the consumer decision to conduct shopping online, using comprehensive data representative of the U.S. population. The estimation results demonstrate that there exists a direct relationship between the state sales tax rate and consumer participation in e-commerce. However, although statistically significant, this effect is relatively small. The estimates indicate that a 1 percent increase in the tax price leads to only a 0.5 percent decline in the probability of participation in online commerce.

Suggested Citation

  • James Alm & Mikhail I. Melnik, 2005. "Sales Taxes and the Decision to Purchase Online," Public Finance Review, , vol. 33(2), pages 184-212, March.
    • Handle: RePEc:sae:pubfin:v:33:y:2005:i:2:p:184-212
    DOI: 10.1177/1091142104267929
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    References listed on IDEAS

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