A Consumer's Perspective on the Use Tax and Electronic Commerce

Abstract

ABSTRACT Taxing electronic commerce is one of the most contentious tax policy issues facing state governments in the 21st century. This article focuses on tax compliance and the reaction of consumers towards taxing electronic commerce sales. Most of the existing work has focused on state governments and how they are responding to this tax policy issue. The key question asked in this article is “if a sales tax were charged on online purchases, would consumers buy less?” This study uses a national survey and found that nearly 50 percent of consumers who purchase online would buy less if a sales tax were charged for online purchases. Controlling for other factors, individuals who agreed that they would purchase less were more likely to be male, married, very social, have more years of online experience, and heavy spenders on purchasing goods or services on the Internet.