The Impact of the Amazon Tax on Local Sales Tax Revenue in Urban and Rural Jurisdictions

The Impact of the Amazon Tax on Local Sales Tax Revenue in Urban and Rural Jurisdictions

E‐commerce has become an integral part of Americans’ lives and while it offers many benefits, it also represents forgone sales tax revenue for governments. Using a difference‐in‐differences model, this analysis examines how the Amazon tax affected local sales tax collections in North Carolina and whether that impact has been greater for urban, rural, or tourism‐rich counties. The results suggest that the Amazon tax increased revenues and urban jurisdictions benefit most. This finding is important for practitioners and policymakers as they consider the impact of policy changes, such as the South Dakota v. Wayfair ruling, on revenue capacity and financial management.

Key findings

The findings confirm the assumption that taxing e-commerce, in this case Amazon.com, will increase LST revenue.

With regard to the competing hypotheses of which classification of county will most benefit, the results suggest that urban counties will generate both more total dollars and per capita LST revenue than either rural or tourism-rich counties due to the Amazon tax.

Urban counties in North Carolina are estimated to have collected approximately $1.27 per capita more than rural counties each month and $0.56 more per capita than tourism-rich counties due to the imposition of the Amazon tax.

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