Thursday, March 18, 2021
Eleanor Wilking (Cornell) presents Who Bears the Cost of a Change in Remittance Policy?: Evidence from Amazon's Voluntary Collection Agreements virtually at Indiana today as part of its Tax Policy Colloquium Series hosted by Leandra Lederman:
The South Dakota vs. Wayfair (2019) Supreme Court decision changed a long-standing difference in the way U.S. sales tax administrations treated online and brick-and-mortar commerce. Online retailers now have to remit sales taxes in most states. Despite the attention this decision received, we know little about how shifting the responsibility to remit from the consumer to the retailer will affect the tax system. Using states’ staggered adoption of Voluntary Collection Agreements (VCAs) which committed large online retailers to remit taxes prior to the Wayfair decision, we find that the increase in compliance resulting from these arrangements was almost fully passed-through to consumers via higher tax-inclusive prices. Consumers also reduced their online expenditures. However, we do not find strong evidence of an impact on the elasticity of the tax base.
These results suggest that remittance rule changes such as the Wayfair decision are successful in stemming sales tax base erosion and that the burden of increased enforcement is mainly borne by consumers.