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A World Without Borders Revisited: The Impact of Online Sales Tax Collection on Shopping and Search
I study the effect of closing the online sales tax loophole on online spending and search. Using online shopping data, sales taxes, and Amazon’s staggered sales tax collection, I estimate that household price elasticity is −1.9, implying a 13% decline in Amazon’s revenues upon sales tax collection. After Amazon collects sales taxes, households increase their spending on Amazon’s taxed competitors, but not its untaxed competitors. I find no evidence that households change their browsing or shift their spending offline. Collecting sales taxes online will help governments recapture lost ...