Electronic purchases, cross-border shopping, and sales taxation

This dissertation reviews a variety of issues regarding online businesses, especially the relationship between sales taxes and Internet purchases. I investigate the relationship between them, and expand it to include cross-border shopping. I analyze the roles played by place of residence and the sales-tax rates in determining the decision of the consumer, using CPS (Current Population Survey) data for 1997 and 2001.;I find that Internet shopping increases with the sales-tax rates. When a consumer lives in a jurisdiction with a high sales-tax rate, she/he would like to use Internet shopping. I also estimate the relationship between online purchases and the consumer's geographic characteristics. I expect that when she lives in a jurisdiction adjoining another jurisdiction with a lower sales-tax rate, a consumer would be more likely to travel across the border and purchase goods in a different jurisdiction, instead of making electronic purchases. According to my estimation, if the consumer lives in a jurisdiction adjoining a different jurisdiction with a lower sales-tax rate, an individual would be less likely to make Internet purchases.;I analyze the welfare effects of a revenue-neutral change in tax policies under which the sales and use tax is successfully collected from remote sales (online commerce and mail-order shopping). I compare the welfares of two cases; one is the case in which consumers can escape the sales and use tax by remote sales (the present real world), and the other is that in which state and local governments can successfully collect the sales and use tax from remote sales (an alternative scenario). I use the excess burden to elucidate the economic inefficiency of the current sales tax system, which is characterized by tax evasion with mail-order shopping and e-commerce. A representative consumer can realize a welfare increase when state and local governments can successfully impose the sales and use tax on remote sales, and decrease sales-tax rates.