IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_11252.html
   My bibliography  Save this paper

Remittance Rules and the Distribution of Local Tax Revenue: Evidence after Wayfair

Author

Listed:
  • David R. Agrawal
  • Iuliia Shybalkina

Abstract

Requiring firms, rather than individuals, to remit sales taxes improves tax compliance. In the U.S., this shift toward firm-based remittance rules for remote purchases occurred gradually after South Dakota v. Wayfair. Using comprehensive and high-frequency local sales tax revenue data, we show that due to the increased compliance after Wayfair, revenues increased in the average locality by 5.4% and subsequently increased 5.1% after states required platforms to pay taxes on behalf of marketplace vendors. Critically, these effects are mainly a result of substantial increases in small towns and counties, with much smaller effects in larger jurisdictions. Increases in tax compliance thus influence both the level of tax revenues as well as its distribution across places.

Suggested Citation

  • David R. Agrawal & Iuliia Shybalkina, 2024. "Remittance Rules and the Distribution of Local Tax Revenue: Evidence after Wayfair," CESifo Working Paper Series 11252, CESifo.
    • Handle: RePEc:ces:ceswps:_11252
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp11252.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Andrew J. Bibler & Keith F. Teltser & Mark J. Tremblay, 2021. "Inferring Tax Compliance from Pass-Through: Evidence from Airbnb Tax Enforcement Agreements," The Review of Economics and Statistics, MIT Press, vol. 103(4), pages 636-651, October.
    2. Bruce, Donald & Fox, William F., 2000. "E-Commerce in the Context of Declining State Sales Tax Bases," National Tax Journal, National Tax Association, vol. 53(n. 4), pages 1373-90, December.
    3. Bruce, Donald & Fox, William F., 2000. "E-Commerce in the Context of Declining State Sales Tax Bases," National Tax Journal, National Tax Association;National Tax Journal, vol. 53(4), pages 1373-1390, December.
    4. Kanbur, Ravi & Keen, Michael, 1993. "Jeux Sans Frontieres: Tax Competition and Tax Coordination When Countries Differ in Size," American Economic Review, American Economic Association, vol. 83(4), pages 877-892, September.
    5. Andrew Bibler & Laura Grigolon & Keith F. Teltser & Mark J. Tremblay, 2024. "Identifying Tax Compliance from Changes in Enforcement: Theory and Empirics," CESifo Working Paper Series 10921, CESifo.
    6. Shu Wang & David Merriman & Frank Chaloupka, 2019. "Relative Tax Rates, Proximity, and Cigarette Tax Noncompliance: Evidence from a National Sample of Littered Cigarette Packs," Public Finance Review, , vol. 47(2), pages 276-311, March.
    7. Donald Bruce & William F. Fox & Alannah M. Shute, 2023. "Wayfair: A Step Towards the Destination, But Sales Tax Competition Remains," NBER Chapters, in: Policy Responses to Tax Competition, National Bureau of Economic Research, Inc.
    8. Andrew Bibler & Laura Grigolon & Keith F. Teltser & Mark J. Tremblay, 2024. "Identifying Tax Compliance from Changes in Enforcement: Theory and Empirics," CRC TR 224 Discussion Paper Series crctr224_2024_505, University of Bonn and University of Mannheim, Germany.
    9. John L. Mikesell & Justin M. Ross, 2019. "After Wayfair: What Are State Use Taxes Worth?," National Tax Journal, National Tax Association;National Tax Journal, vol. 72(4), pages 801-820, December.
    10. John Gardner, 2022. "Two-stage differences in differences," Papers 2207.05943, arXiv.org.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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).
    2. 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.
    3. 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).
    4. Yoshimi Adachi & Hikaru Ogawa, 2022. "Cross-Border Shopping, E-Commerce, and Consumption Tax Revenues in Japan," CIRJE F-Series CIRJE-F-1204, CIRJE, Faculty of Economics, University of Tokyo.
    5. 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.
    6. Hiroshi Aiura & Hikaru Ogawa, 2024. "Does e-commerce ease or intensify tax competition? Destination principle versus origin principle," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(3), pages 702-735, June.
    7. 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).
    8. Donald Bruce & William Fox & Matthew Murray, 2003. "To Tax Or Not To Tax? The Case Of Electronic Commerce," Contemporary Economic Policy, Western Economic Association International, vol. 21(1), pages 25-40, January.
    9. Propheter Geoffrey, 2015. "Political Institutions and State Sales Tax Base Erosion," Statistics, Politics and Policy, De Gruyter, vol. 6(1-2), pages 1-17, December.
    10. Horacio L. P. Piffano, 2007. "Argentina and Brazil: Fiscal Harmonization and Subnational Sales Taxation – State / Provincial VAT versus State / Provincial Retail Sales Tax," Department of Economics, Working Papers 069, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.
    11. David Hanrahan, 2021. "Digitalization as a Determinant of Tax Revenues in OECD Countries: A Static and Dynamic Panel Data Analysis," Athens Journal of Business & Economics, Athens Institute for Education and Research (ATINER), vol. 7(4), pages 321-348, October.
    12. Andrew F. Haughwout & Benjamin Hyman & Or Shachar, 2022. "The Municipal Liquidity Facility," Economic Policy Review, Federal Reserve Bank of New York, vol. 28(1), July.
    13. Bruno Albuquerque & Georgi Krustev, 2018. "Debt Overhang and Deleveraging in the US Household Sector: Gauging the Impact on Consumption," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 64(2), pages 459-481, June.
    14. William F. Fox & Matthew N. Murray, 2005. "Sales Taxation in a Global Economy," Contributions to Economic Analysis, in: Taxing the Hard-to-tax: Lessons from Theory and Practice, pages 221-244, Emerald Group Publishing Limited.
    15. Robert Tannenwald, 2001. "Are state and local revenue systems becoming obsolete?," New England Economic Review, Federal Reserve Bank of Boston, pages 27-43.
    16. Donald Bruce & John Deskins, 2012. "Can state tax policies be used to promote entrepreneurial activity?," Small Business Economics, Springer, vol. 38(4), pages 375-397, May.
    17. Argilés-Bosch, Josep M. & Somoza, Antonio & Ravenda, Diego & García-Blandón, Josep, 2020. "An empirical examination of the influence of e-commerce on tax avoidance in Europe," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 41(C).
    18. Tessa Conroy & Harvey Cutler & Stephan Weiler, 2016. "The State-Level Impacts of Enforcing Sales Taxes for E-retail Purchases," Growth and Change, Wiley Blackwell, vol. 47(2), pages 276-295, June.
    19. Robert Tannenwald, 2004. "Massachusetts business taxes: unfair? inadequate? uncompetitive?," Public Policy Discussion Paper 04-4, Federal Reserve Bank of Boston.
    20. Richard Hawkins & Matthew N. Murray, 2004. "Explaining Interjurisdictional Variations in Local Sales Tax Yield," Public Finance Review, , vol. 32(1), pages 82-104, January.

    More about this item

    Keywords

    sales tax; online shopping; e-commerce; remittance rules; tax revenue; compliance;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_11252. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.