Keywords

sales taxes, e-commerce, retail sales, South Dakota v. Wayfair

Abstract

We investigate the impact of adopting economic nexus laws on local consumer consumption patterns. To do so, we focus on a natural experiment involving Washington State, which enacted economic nexus in October of 2018, and its neighboring state Oregon, which has no sales tax. Utilizing data from the Nielsen Consumer Panel survey, we estimate a difference-in-differences regression to test whether the imposition of sales tax on internet purchases in Washington led to an increase in brick and mortar (B&M) retail purchases relative to those in Oregon. We report evidence that consumers in Washington increased purchases at B&M retailers relative to consumers in Oregon, and that this effect is especially prominent in counties surrounding the Washington-Oregon border. We test for whether economic nexus is associated with sales tax avoidance by examining vehicle trips by Washington consumers to five Oregon shopping centers along the Oregon-Washington border. We find that vehicle trips by Washington residents to nearby Oregon shopping centers are also positively associated with Washington’s adoption of economic nexus. These results further confirm the mechanism of sales tax incidence on online sales leading to an increase in cross-border retail B&M shopping trips and offer tangible real-world insight into consumer consumption and sales tax avoidance behavior in our setting.

Original Publication Citation

“The Effect of Economic Nexus on Sales Tax Avoidance and Retail Competition” With John Robinson and Stephen Stewart, 2nd round, The Accounting Review

Document Type

Working Paper

Publication Date

2024

Publisher

The Accounting Review

Language

English

College

Marriott School of Business

Department

Accountancy

University Standing at Time of Publication

Assistant Professor

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