Sales Tax Compliance Research Articles

Effect of Moral Obligation on Sales Tax Compliance among SME Taxpayers in Juba, South Sudan

Tax compliance promotes social and economic growth by reducing the government's fiscal imbalance and debt while also providing funding for public services. Currently, the National Revenue Authority of South Sudan is focusing on maximizing tax revenue production from the country's huge number of small and medium enterprises, and this study contributes to that endeavour. The study's main goal was to examine the moral obligation, of sales tax compliance among SMEs. This study was guided by Tax Morale Theory. The study used an explanatory research design and the study's target population was 1,320 SMEs, with 307 SMEs in Rejaf Sub-County registered for sales tax. The data was examined using both descriptive and inferential statistics. The study found that there is a positive and significant effect of moral obligation on sales tax compliance (β1 =0.241, p<0.05), The study recommends that South Sudan's Ministry of Finance and Economic Planning build a strong mechanism for monitoring and evaluating the efficiency of tax policy implementation. Furthermore, research should involve a more diversified set of SMEs to capture a greater variety of opinions, taking into account differences in size, industry, and ownership structure.

Exploring Items for Measuring the Sales and Service Tax (SST) Compliance Constructs using Exploratory Factor Analysis (EFA) Procedure

Exploring Items for Measuring the Sales and Service Tax (SST) Compliance Constructs using Exploratory Factor Analysis (EFA) Procedure

Moderating Role of Personality Traits Between Tax Audit, Tax Rate, Tax Penalty and Sales Tax Compliance in Pakistan

The landscape of Finance in the modern day has become dynamic- with the introduction of behavioural finance, and the possibilities are endless. The study aims to demonstrate the impact of tax audits, tax rates, and tax penalties on sales tax compliance in light of personality traits. To this stage, the effect of personality traits and behavioural trends on sales tax compliance has not been explored thoroughly in Pakistan. In this study, 340 questionnaires were distributed through convenience sampling to the owners-managers of manufacturing and service sector representatives of SMEs operational in Faisalabad, Pakistan. After this, the data collected through the questionnaire were categorically analyzed using SPSS to validate the measurement model and structure. The findings demonstrated the direct positive relationship between tax audit, tax rates, tax penalty, and sales tax compliance. Further, the personality trends of neuroticism reflect a significant impact as a moderator towards tax-compliant behaviour. Policymakers may deploy these findings to enhance sales tax collection by making individualized systems catering to specific behaviours and personality traits to ensure maximum tax compliance. Tax administration authorities should deploy strict policies to deal with the non-compliant behaviour of taxpayers. It will help enhance the tax-to-GDP ratio of Pakistan and will generate more funds for public expenditures.

Online shopping can redistribute local tax revenue from urban to rural America

What is the effect of e-commerce on the geographic distribution of local sales tax revenues? Using COVID-19 as a shock to online shopping and hand-collected high-frequency data on local sales tax revenue, we document an important shift in the state and local public finance landscape. As e-commerce increases, a destination basis for remote sales taxes results in higher growth in local sales tax collections in smaller, generally more rural jurisdictions. This increase comes at the expense of larger urban retail centers, which previously enjoyed an origin basis for sales tax collections. As households replace in-person commerce with online shopping, sales taxes no longer accrue to urban centers with large concentrations of retail establishments and instead expand the tax base of smaller jurisdictions. State-level reforms that enforce sales tax compliance generally mitigate the revenue falls in larger jurisdictions and amplify the increases in smaller jurisdictions.

Remote tax authority

Tax enforcement and compliance are critical features of any tax system. One way that prior studies examine these topics is by measuring taxpayer responses to different types of letters from a tax authority. We extend this research by focusing on ‘remote firms’ – firms with no physical presence in the tax authority's jurisdiction – and examining sales tax compliance. Specifically, we partner with the Texas Comptroller's office to conduct a randomized field experiment that examines whether and why firms comply with remote tax authority. Using a sample of remote firms with a recent history of late filing, we find that tax authority correspondence increases the average reported sales tax base by 105 percent and tax payments by $3,711, although the effects are short-lived. Our evidence suggests that the effect is driven by increased salience of firms' tax obligations. Our study offers key insights given the growth in cross-border transactions and remote taxation.

MODERATION OF TRUST IN GOVERNMENT IN MODELLING TAX COMPLIANCE BEHAVIOUR BASED ON TAX FEATURES

of tax revenue, Jordan government is haunted by a high rate of tax non-compliance behaviour that cost around JD1.4 billion in 2017. Thus, revealing the factors that determine the compliance behaviour has become imperative. Therefore, this study investigates the possible factors of tax compliance among SMEs in Jordan with consideration of trust in government as a moderator. The conceptual framework of this study include sales tax compliance behaviour as the dependent variable and the antecedents are tax knowledge, tax fairness, tax morale, tax authority, tax rate, and tax penalties. The population of this study is the small and medium size firms (SMEs) in Amman, Jordan. Approximately 59.9 percent (8,485 firms) of Jordanian SMEs are located in the capital city of Amman and the suitable sample size based on Morgan-Kerjice formula is 373. Unit of analysis for this research is the company principals (owners, CEOs, Financial managers) of the SMEs. The study adopts the direct collect survey technique to reach a relatively specific-target sample of SME principals. For data analysis, SmartPLS is used to do the regression-based analysis, but SPSS is used for data cleaning, demographic and descriptive analysis. Tax fairness has no significant impact while the other five antecedents have significant impacts. The precedence for the relations based on the path coefficient value is tax penalty (0.436), tax rate (0.233), tax authority (0.199), TK (0.142), and tax morale (0.103). Government trust have a significant moderation in two relationships that associated with tax authority and tax rate. KEYWORDS: tax compliance behaviour, tax knowledge, tax fairness, tax morale, tax authority, tax rate, tax penalties, trust in government, Jordan

Statutory incidence and sales tax compliance: Evidence from Wayfair

This paper studies the compliance, pricing, and progressivity effects of changing statutory incidence. The Wayfair Supreme Court decision granted U.S. states new authority to shift the statutory incidence of taxation from consumers to online and out-of-state retailers, forcing supply-side remittance of the sales tax. With state-level data, we find this increased sales tax revenues by 7.9 percent, concentrated in states with stringent compliance standards. With barcode-level scanner data, we find evidence of full pass-through of the tax to consumers. Effects are progressive however, with the reforms increasing tax liabilities principally for higher-income households.

Determinants of Tax Compliance Intention among Jordanian SMEs: A Focus on the Theory of Planned Behavior

The present study aimed to adopt the extended theory of planned behavior (TPB) to determine the intentions of owner-managers in SMEs towards engaging in sales tax compliance. The study distributed a total of 660 questionnaire copies through systematic random sampling to the mangers/owners of Jordanian manufacturing SMEs, from which 385 questionnaire copies were retrieved and considered useable and appropriate for further analysis. The study made use of Partial-Least Squares-Structural Equation Modeling (PLS-SEM) for the validation of the measurement model and structural model, and to establish the predictive relevance of the proposed model. Based on the obtained findings, the attitude towards behavior, subjective norms, perceived behavioral control and patriotism were significant determinants of the intentions towards engaging in sales tax compliance among the examined enterprises.

The Disproportionate Sales Tax Compliance Burden on Small- and Medium-Sized Online Businesses After Wayfair

Many states’ sales and use tax provisions, updated in response to the Supreme Court’s decision in South Dakota v. Wayfair, Inc., will likely impose a disproportionate tax compliance burden on small- and medium-sized businesses (SMBs) that engage in e-commerce. Relative to large companies like Amazon and eBay, SMBs cannot absorb the high compliance costs associated with tracking, collecting, and remitting taxes. Wayfair expanded states’ authority to collect sales taxes on companies without a physical presence in the state. But states should wield this power judiciously. While mimicking South Dakota’s statute (upheld as constitutional in Wayfair) may help states avoid litigation, they would better promote the goals of fairness and efficiency by exempting a larger category of small vendors from sales tax obligations. In light of the COVID‑19 pandemic, which has acutely hurt SMBs, reducing sales tax-related compliance burden would also help states provide relief to struggling SMBs. States should (1) clarify which entities are subject to the remote seller and marketplace facilitator statutes and (2) raise the de minimis safe harbor thresholds that shield smaller businesses from having to remit taxes.

The effect of tax rate on sales tax compliance among Jordanian public shareholding corporations

Compliance to tax payment generally results in mitigating fiscal deficit and public debt, and in turn, provides funding to meet the economic and social development. However, regardless of the directed efforts of the government to increase sales tax compliance (or value added tax as it is referred to globally), Jordanian listed firms on the Amman Stock Exchange, compliance remains an issue in light of its negative impact on the government revenues. Literature dedicated to tax rate effects on sales tax compliance in the context of listed Jordanian firms on the Amman Stock Exchange has largely been lacking and as such, the study’s main objective is to examine the effect of tax rate on sales tax compliance among such firms. The study adopted a survey method with questionnaire copies distributed to 191 listed Jordanian firms. In the tabulation of data, only 169 questionnaire copies were deemed to be valid for the analysis. The formulated study hypotheses were tested using PLS-SEM and based on the results, tax rate has an insignificant effect on sales tax compliance. Future studies are recommended to provide further insight into the study determinants. The study contributes by furnishing information to and guiding policymakers and the listed Jordanian firms in enhancing sales tax compliance.

Statutory Incidence and Sales Tax Compliance: Evidence from Wayfair

This paper studies the compliance, pricing, and progressivity effects of changing statutory incidence. The recent Wayfair Supreme Court decision granted U.S. states new powers to shift the statutory incidence of taxation from consumers to online retailers, forcing supply side-administration of the sales tax. With state-level data, we find this increased sales tax revenues by 5.4 percent, more so in states with stringent compliance standards. With barcode-level scanner data, we find evidence of full pass-through of the tax to consumer prices. Effects are largely progressive however, with increased tax liabilities only for higher-income households

SALES TAX COMPLIANCE AND ITS DETERMINANTS IN MALAYSIA

Tax compliance behaviour has been addressed as a continuous serious concern globally. However, empirical research on sales tax compliance in Malaysia is still scarce. The present study can be considered a first attempt that was conducted in the context of sales tax version 2.0 for sales tax compliance in Malaysia. The main objective of this study was to investigate the determinants of sales tax compliance behaviour among Small and Medium Enterprises (SMEs) in Malaysia. The studies used the Fischer model as a basic model with the inclusion of socio-psychological factors (tax complexity, peer influence, tax fairness, tax knowledge, service quality, and compliance cost) and economic factors (tax complexity) with sales tax compliance. As a new contribution to tax compliance knowledge, the relationship between tax compliance behaviour and its determinants was also examined. Using the samples collected from employees who are working in SMEs under the manufacturing sector, findings show that tax complexity, tax fairness, peer influence, and tax knowledge have significant influences on compliance behavior. Meanwhile tax law and enforcement, service quality and compliance cost variable on tax compliance were non-significant. This study concluded with the theoretical and practical implications for the tax authority and the government of Malaysia.

Do public governance and patriotism matter? Sales tax compliance among small and medium enterprises in developing countries: Jordanian evidence

PurposeThe purpose of this study is to better understand the issues on tax compliance. This study aims to examine the influence of patriotism and public governance on the sales tax compliance of small and medium enterprises (SMEs) and to examine the interaction between patriotism and public governance on sales tax compliance.Design/methodology/approachThis study was carried out by soliciting the opinions of owner-managers of SMEs in Jordan through a survey that was distributed by self-administered. This paper uses partial least squares structural equation modelling to investigate the influence of patriotism, public governance and the interaction of these two mechanisms on sales tax compliance for a sample of 385 SMEs.FindingsThis paper finds that patriotism and the public governance increase and improve the level of sales tax compliance. The findings also supported the interaction effect of patriotism on the relationship between public governance with sales tax compliance. Thus, all the hypothesised relationships were supported.Practical implicationsTax authorities and policymakers in developing majority societies in developing countries and in other Arab countries, especially in Jordan, may use the results to focus their interest on the formulation of policies founded on the outcomes of the study to strengthen the compliance of eligible SMEs to further boost their sales collections.Originality/valueVery few studies have examined the determinants of sales tax compliance, and there has been an absence of work that examines the influence of the patriotism and public governance on sales tax compliance. This paper, therefore, fills a gap in the literature by providing the first empirical evidence about the influence of patriotism and public governance on sales tax compliance of SMEs in developing countries. This study is the initial paper to examine the interaction between patriotism and public governance on sales tax compliance among SMEs in developing countries

A Socio-Economic Model of Sales Tax Compliance

Tax compliance is an issue that can be traced back to the introduction of taxes, which is the reason such compliance remains a significant topic in the current literature of academia and practice. Prior studies on the topic of tax compliance or non-compliance can be categorized into two, namely economic and social/psychological theories. In a more serious note, tax evasion has remained a key issue among governments all over the globe, with Jordan being no exception. Jordan has undertaken different fiscal measures to increase compliance in the domestic front in the past decades, but based on annual reports, the country is still experiencing a considerable increase in net public debt and fiscal deficit that can be traced back to the increased tax non-compliance rate. This is specifically true in the case of sales tax in Jordan. To compound the matter further, literature concerning the determinants of sales tax compliance as well as other determinants that drive non-compliance is still scarce, with a universal tax compliance model able to explain the issue with clarity still being elusive. Hence, this work proposed the determinants of sales tax compliance in the context of small and medium-sized enterprises (SMEs) in Jordan, extending Fischer’s model of tax compliance, and adding the moderating role of tax knowledge and direct effect of tax service quality. This study proposed a model encapsulating the social, psychological and economic factors to provide insight into the sales tax compliance of Jordanian SMEs.

Moderating role of patriotism on sales tax compliance among Jordanian SMEs

PurposeThe purpose of this paper is to investigate the impact of tax audit, tax rate and tax penalty on sales tax compliance and examine the moderating effect of patriotism on the associations between tax audit, tax rate and tax penalty with sales tax compliance among Jordanian manufacturing small- and medium-sized enterprises (SMEs).Design/methodology/approachIn this study, 660 questionnaires were distributed by using systematic random sampling to manufacturing SMEs in Jordan, after which a total of 385 useable questionnaires were deemed suitable for analysis. Partial least squares structural equation modelling (PLS-SEM) was used to validate the measurement model and structural model and the predictive relevance of the study’s model.FindingsThe findings showed that tax audit and tax penalty were positively associated with the level of sales tax compliance, whereas tax rate was insignificantly associated with sales tax compliance. They also demonstrated the moderating significant effect of patriotism on the relationship between tax penalty, tax audit and tax rate with sales tax compliance.Research limitations/implicationsTax authorities and policymakers in developing majority societies in developing countries and in other Arab countries, especially in Jordan may use the results to focus their interest on the formulation of policies founded on the outcomes of the study to strengthen eligible SMEs to comply to further boost their sales collections.Originality/valueThis study extends the deterrence theory in the context of sales tax compliance by proposing the moderating effect of patriotism in the deterrence theory on sales tax compliance among SMEs. Moreover, the suitability for the use of PLS-SEM as a statistical tool in investigating the extended deterrence theory with patriotism as a moderating variable as well as its implications for theory and practice was also discussed.

The Influence of Tax Complexity on Sales Tax Compliance among Jordanian SMEs

The Influence of Tax Complexity on Sales Tax Compliance among Jordanian SMEs

The Effect of Tax Moral on Sales Tax Compliance among Jordanian SME

The current paper examines the relation between tax moral and the sales tax compliance of SMEs. The impact of tax moral on sales tax compliance has been received a very little attention. However, to date, there has been no work on the effect of tax moral on sales tax compliance among Jordanian SMEs. This relationship was then tested based on the survey outcomes from 212 SMEs serving in Jordan. The Partial Least Squares (PLS) results revealed positive influence of tax moral on sales tax compliance. Besides extending the body of knowledge by providing a model to explain how tax moral influence sales tax compliance, the results offer insights on the tax moral of sales tax compliance among SMEs. This study also highlights the implications of this finding towards the owner-managers of SMEs and the potential future research.

The Effect of Peer Influence on Sales Tax Compliance Among Jordanian SMEs

The purpose of this study is to examine the impact of peer influence on sales tax compliance of Jordanian small and medium enterprises (SMEs). While the impact of peer influence on income tax compliance has been examined by prior research, the effect of peer influence on sales tax compliance of SMEs has been neglected. Therefore, this study is the first to examine this relationship among Jordanian SMEs. A questionnaire has been used to collect data from the study sample, which consisted of 212 owner-managers of SMEs. The research hypothesis was then tested using PLS-SEM software. This study provides the first evidence that peer influence has an insignificant impact on sales tax compliance among Jordanian SMEs. According to the finding, the implications of the study as well as suggestions for future studies are also discussed.

Amicus Brief in Wayfair v. South Dakota

The passage of time and changing circumstances have rendered the physical-presence requirement articulated in National Bellas Hess, Inc. v. Department of Revenue, 386 U.S. 753, 758 (1967), and Quill Corporation v. North Dakota, 504 U.S. 298, 324-15 (1992), a harmful anachronism. Standard tools of economic analysis that the Court considered in Comptroller of the Treasury v. Wynne reveal that South Dakota’s sales and use tax regime,3 as amended by S.B. 106, promotes neutral treatment of in-state and interstate commerce. By contrast, the bright-line physical-presence requirement set forth in Bellas Hess and Quill forces states to extend what is in practice a discriminatory subsidy in favor of a specific class of out-of-state sellers, namely, those sellers who lack a physical presence within the state. On the facts of the challenged statute, there is no valid economic reason to mandate such a discriminatory subsidy. While there once may have been sufficient concerns as to whether sales tax compliance costs would impose an undue burden on out-of-state sellers so as to justify a bright-line physical-presence rule, such concerns no longer exist here. Given the specific features of South Dakota’s sales and use tax regime and the state’s adherence to the Streamlined Sales and Use Tax Agreement (“SSUTA”), there is no credible argument that the South Dakota tax regime is excessively burdensome on remote sellers. From an economic standpoint, a bright-line physical-presence requirement prohibiting S.B. 106 makes no sense. The Court has, in analogous circumstances, utilized the flexible balancing test articulated in Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970), to assess whether a given state law imposes an undue burden on interstate commerce. Such an approach is warranted here. Under the balancing test, South Dakota’s important state interest in collecting sales taxes outweighs the minimal tax compliance burden on out-of- state sellers. S.B. 106 should therefore be upheld.

The New Normal for Sales and Use Tax in the United States: Will a State Challenge to Supreme Court Precedent Overhaul Sales and Use Tax Compliance for Online Retailers?

The New Normal for Sales and Use Tax in the United States: Will a State Challenge to Supreme Court Precedent Overhaul Sales and Use Tax Compliance for Online Retailers?