Retailer Remittance Matters: Evidence from Voluntary Collection Agreements

Abstract

Recent reforms have shifted tax-remittance responsibility for online purchases from consumers to sellers, thereby eliminating an important disparity between tax treatments of online and brick-and-mortar commerce. Despite the attention these reforms received, we know little about how shifting the responsibility to remit affects consumption or the tax system. To remedy this, we study US states’ staggered adoption of voluntary collection agreements, which committed large online retailers to remit sales taxes. We find that this change stemmed sales-tax base erosion and shifted consumption toward brick-and-mortar retailers. The increased tax burden resulting from the effective tax increase fell mainly on consumers, but it did not significantly alter the distributional burden of US sales taxes.