ISSUE BRIEF 07.13.17 E-Commerce: Recent Developments in State Taxation of Online Sales

Joyce Beebe, Ph.D., Fellow in Public Finance

Online retail giant recently identified by OECD, e-commerce is defined announced that it would voluntarily start broadly as “the sale or purchase of goods collecting sales in four additional or services, conducted over computer states—Hawaii, Idaho, Maine, and New networks by methods specifically designed Mexico—making the company a nationwide for the purpose of receiving or placing state sales collector.1 This marks the orders.”4 If further segregating it by sales culmination of an interesting evolution of channels, there are business-to-business company policy, because until recently, (B2B), business-to-consumer (B2C), and Amazon was one of the fiercest opponents consumer-to-consumer (C2C) models of of online .2 Some observers have e-commerce. Despite the public’s familiarity suggested that this signifies a change in with B2C or C2C models, B2B is the largest Amazon’s business model over the last among the three in terms of total sales. few years. Its early success was partly Widespread access to the attributable to keeping online purchases tax contributes significantly to the growth of free; however, in recent years, Amazon has e-commerce. Other factors, such as the distinguished itself by offering faster and development of technically sophisticated expedited deliveries through services such online platforms and the proliferation of as Amazon Prime and Amazon Prime Air. mobile devices, further enhance buyers’ A 2015 estimate shows that, on average, online purchasing experiences.5 According Amazon Prime shoppers spent about $700 to the U.S. Census Bureau, e-commerce more per year than non-Prime shoppers.3 sales have been growing at a rapid rate E-commerce sales over the last decade. The 2015 sales have been growing at were estimated to be $6.6 trillion in the WHAT EXACTLY IS E-COMMERCE AND manufacturing, wholesale, retail, and service a rapid rate over the HOW LARGE IS ITS SIZE TODAY? sectors, among which the retail sector last decade. The 2015 sales were $340 billion.6 E-commerce There are numerous online merchants sales were estimated has expanded rapidly both in terms of like Amazon in today’s rapidly developing to be $6.6 trillion in transaction volume and sales amount.7 . According to a recent the manufacturing, publication by the Organisation for Economic wholesale, retail, and Co-operation and Development (OECD), the THE STATES NEED REVENUE service sectors. digital economy is increasingly becoming fully integrated into the world economy; Sales Tax it would be difficult, if not impossible, to The sales tax is an important source of ring-fence the digital economy from the revenue at the state level.8 Although its rest of the economy for tax purposes. importance varies by state, in aggregate, Among several types of business models sales tax has been the second-largest source RICE UNIVERSITY’S BAKER INSTITUTE FOR PUBLIC POLICY // ISSUE BRIEF // 07.13.17

of state tax revenue, only after the personal a local retail store. The complements income tax. In 2016, sales tax accounted for sales tax and serves as a backstop for the 31 percent of total state tax revenue, whereas potential loss of tax revenue. personal income tax accounted for 37 percent The issue is that this equivalence only of total revenue. In states where there is no happens in a perfect world—state and local personal income tax, the sales tax is more use tax compliance is very weak, especially prominent: in Texas and Florida, sales tax at the household or consumer level. Simply represented 62 percent and 57 percent of imagine that consumers have to report use state tax revenues in 2016, respectively.9 taxes on tax returns for all purchases made Over the last four decades, the from remote vendors, and it is probably aggregate sales tax base across all states not hard to understand why compliance is has contracted, creating financial issues low. In certain studies, revenue collected A raft of competing for states that rely heavily on sales taxes. from a use tax barely covers the costs of 10 remote sales tax Some research has attributed this base administering the tax. reduction to several potential reasons: first, proposals was sales tax generally applies to tangible goods Supreme Court: Physical Presence introduced in Congress but to only a limited set of services. Second, Any discussion of online sales tax would over the last few both state policies exempting certain items not be complete without mentioning the years: the Marketplace such as food and clothing and occasional Quill decision. In 1992, the U.S. Supreme statewide tax holidays have also contributed Fairness Act, the Court ruling in Quill Corp. vs. North Dakota13 to the base shrinkage. Finally, the growth precluded states from imposing a sales tax Remote Transactions 11 of remote sales and the limited extent to collection obligation on remote retailers that Parity Act, the No which they are taxed contributed to the do not have a physical presence in the state. 12 Regulation Without erosion of the tax base. In other words, nexus arises only when the Representation Act, vendor has a physical presence in a state. Use Tax and the Online Sales In addition to establishing the physical It is worth introducing sales tax’s close presence rule, the Supreme Court also noted Simplification Act. cousin, use tax, before discussing recent that Congress has the power under the legal developments. Every state that has of the U.S. Constitution to enacted a sales tax simultaneously or overrule this decision legislatively. subsequently enacted a corresponding Many states view Quill as outdated and use tax. When a buyer purchases taxable assert that it prevents them from collecting goods from a remote seller without paying sales tax revenue from remote vendors, sales tax because the seller does not have which leads to substantial revenue loss. “nexus” within the state, the buyer is According to a joint publication by the required to remit a use tax on taxable goods National Conference of State Legislatures to the state of residence to put the purchase (NCSL) and the International Council of on equal footing with other in-state buyers Shopping Centers (ICSC), in collaboration who paid taxes. From a tax perspective, with the University of , states lost nexus generally refers to a sufficient level an estimated $23.3 billion in uncollected of connection between the taxing state sales and use tax revenue from all remote and the taxpayer or third-party collection sales in 2012. For 2015, the potential agent such that the state has the power to revenue loss increased to $29.6 billion. impose tax on the taxpayer or the collection The study then considered Amazon’s agent. Use taxes shift the responsibilities for enhanced collection efforts in a larger tax remittance from the seller to the buyer number of states, and concluded that the in cases where the tax is not collected by uncollected sales and use tax would decline the seller. In other words, if use taxes are to approximately $25.9 billion,14 which perfectly enforced at the correct sales tax would account for about 9 percent of the rate, then use taxes paid by the consumer 2015 state sales tax revenue.15 The potential on remote sales will be equivalent to the amount of revenue injection, combined with sales taxes paid on the same purchase from Amazon’s recent decision to voluntarily 2 E-COMMERCE: RECENT DEVELOPMENTS IN STATE TAXATION OF ONLINE SALES

collect sales tax nationwide, encouraged a single statewide rate to be applied by a states to take additional actions to pursue remote seller on purchases sent to that state. these revenues.16 STATES TAKE MATTERS IN THEIR OWN FEDERAL LEGAL DEVELOPMENTS HANDS

What has Congress done to resolve the Quill States have been active while waiting issue? In short, not much, but not for lack for a congressional solution, and, not of trying. A raft of competing remote sales surprisingly, moving toward greater tax proposals was introduced in Congress taxation of e-commerce. Generally, these over the last few years; some were even approaches include redefining the nexus introduced multiple times. A short summary and imposing comprehensive notice and is presented below: reporting requirements. The Marketplace Fairness Act (MFA, most recently reintroduced in April 201717) and “Kill Quill”—Nexus Redefined the Remote Transactions Parity Act (RTPA, Over the last few years, states have reintroduced in April 201718) differ in the launched numerous administrative details but are similar in nature. Both bills procedures or enacted legislation in hopes would allow states to tax sales by remote of creating an appropriate case for the U.S. sellers if the states are members of the Supreme Court to review and overturn Streamlined Sales and Use Tax Agreement Quill. Because the Supreme Court did (SSUTA),19 or meet certain requirements not specifically define physical presence, that simplify the compliance process. Both most online merchants, including Amazon proposed bills provide exemptions to small in the company’s early years, interpret remote sellers and require destination- “physical presence” loosely as a fixed based sourcing, which means the tax rate is place of business, comparable to brick- States have been active calculated based on the location of the buyer. and-mortar stores. Therefore, Quill is the while waiting for a The No Regulation Without strongest legal defense cited by opponents Representation Act was introduced in congressional solution. of expanded online sales taxation. Several July 2016. As the name suggests, this These approaches states, maneuvering between pushing the legislation would prevent states from boundaries of the physical presence rule and include redefining the taxing sellers lacking a physical presence, trying to assert their taxation rights, have nexus and imposing essentially codifying Quill. This legislation created expanded interpretations of nexus— comprehensive would specifically establish thresholds click through nexus, economic nexus, and for de minimis physical presence, where notice and reporting affiliate nexus. “physical presence” does not include referral requirements. agreements, presence for less than 15 days Click through nexus generally means the in a taxable year, product delivery in-state use of online referrals or links by an in-state by a third party, or internet advertising resident to redirect customers to the remote services not exclusively directed toward or seller’s website. In 2008, New York State exclusively soliciting in-state customers.20 enacted a “click through nexus” provision, Finally, a discussion draft, the Online specifying that if a seller enters into a Sales Simplification Act (OSSA) specifies a commission agreement with a New York hybrid origin-based system that calculates State resident for referring customers to the taxation of remote purchases based on the remote seller via a link on the resident’s the seller’s location, but at the tax rate of website, the seller has created a taxable the consumer’s location. In other words, presence in New York. The remote seller is the seller’s location would determine if a tax therefore required to collect and remit sales would be collected by that state, but the tax taxes for sales to New York State customers. rate would be calculated based on the buyer’s This was challenged by two major online location. The states would have to participate retailers and eventually ended with the U.S. in a state clearinghouse that would determine Supreme Court denying the merchants’ 3 RICE UNIVERSITY’S BAKER INSTITUTE FOR PUBLIC POLICY // ISSUE BRIEF // 07.13.17

petition to review New York State Court of nexus is established and the remote seller Appeals’ decision in 2013, upholding the needs to collect and remit tax to the Alabama state’s click through nexus statute. Department of Revenue. As expected, an Inspired by the New York State online retailer challenged the law, claiming provision, Illinois enacted its own click the law violates the physical presence through nexus statute in 2011 and was standard set by Quill.25 However, the case is challenged by an online marketing and unlikely to go to trial until fall 2017. advertising operator, Performance Marketing South Dakota adopted a similar statute, Association (PMA), in 2013. The Illinois specifying that an online retailer with a sales Supreme Court did not directly address the threshold of more than $100,000 per year or U.S. Commerce Clause argument made by over 200 transactions essentially created an PMA and instead ruled based on federal economic nexus even if there is no physical law, declaring that certain clauses may be presence.26 This case is currently awaiting discriminatory against e-commerce for review by the state’s Supreme Court, and it violating the (ITFA). is highly anticipated that the losing party will The State of Illinois subsequently redrafted seek U.S. Supreme Court review. the statute by expanding the prior version to include referrals made not only through Notice and Reporting Requirements websites, but also through print publishers Colorado led the trend in developing 21 and broadcasters. The click through nexus comprehensive reporting and disclosure has been in Illinois law since the correction requirements. Under state rules enacted in 22 was made. 2010, remote sellers with gross sales of over $100,000 must either voluntarily collect 23 Affiliate nexus was introduced by and remit sales tax on sales to Colorado Louisiana in 2016 to expand the definition of taxpayers or file a comprehensive report on dealers subject to sales and use taxes. Under sales to Colorado taxpayers with the Colorado this law, “dealer” includes any person who Department of Revenue. This report needs sells similar products as a Louisiana retailer to show the total dollar amount of a buyer’s under a similar name and similar intellectual purchases along with other information, property, solicits business through an agent including shipping and billing addresses. In with a Louisiana nexus, holds a substantial addition, remote sellers also need to notify ownership interest (over 5 percent) in a Colorado buyers that they may have duties Louisiana retailer, or is more than 5 percent to pay use taxes on their purchases, and Online merchants’ owned by a Louisiana retailer. biggest challenge the sellers also must send annual purchase summaries to Colorado buyers. against e-commerce Economic nexus is viewed as a more direct In 2012, Direct Marketing Association taxation is the contradiction of the physical presence (DMA27) challenged the Colorado law and, rule in Quill than the other expanded compliance costs. after the U.S. Supreme Court decided not interpretations of nexus, and the two major to review an appeal filed by DMA, the U.S. economic nexus cases in Alabama and South Tenth Circuit Court of Appeals held that Dakota are still pending in court. State and Colorado’s law did not violate the Commerce local tax practitioners anticipate that one of Clause of the U.S Constitution. The Tenth these two might be a suitable case for U.S. Circuit pointed out that Quill’s standard does Supreme Court review. not apply in its ruling since the reporting Alabama adopted economic nexus rules rules do not require the collection of taxes. in 2015. In essence, if a retailer sells more In response to the growing number than $250,000 of tangible goods to Alabama of states with reporting requirements,28 customers and conducts certain additional the Multistate Tax Commission’s (MTC) use activities in the state, such as having a tax information reporting work group is franchisee or licensee operating under the researching certain relevant issues and plans seller’s name or soliciting orders through to develop a model sales and use tax notice TV advertisements under contract with an and reporting statute. For example, it is not in-state cable TV operator,24 an economic 4 E-COMMERCE: RECENT DEVELOPMENTS IN STATE TAXATION OF ONLINE SALES

immediately clear for online marketplaces Indeed, some research has shown that like eBay whether the third party vendors uniform tax treatment between online and or the marketplace providers should bear traditional sales is more desirable if the the reporting responsibility. In addition, the administrative and compliance costs are work group is considering expanding the low. The research also finds that a significant scope of reporting to include short-term preferential tax or exemption for online sales rentals such as Airbnb.29 is unlikely to be desirable.34 This highlights Despite the proactive approaches the importance of compliance costs for developed by states, certain states’ attempts e-commerce—to gain wider acceptance to advance their online sales tax bills in 2017 of online sales tax, it is critical to ensure failed to gain sufficient support from either that compliance costs are maintained at a lawmakers or the governor: New York,30 reasonable level. Minnesota (House File 4, vetoed by Governor Technology improvements, such as Mark Dayton in May 2017), Texas (S.B. 1713),31 advances in tax compliance software, would Tennessee (H.B. 261), New Mexico (H.B. 2), ease the compliance burdens, and the two All four parties— Mississippi (H.B. 480), and Utah (S.B. 83). federal proposals (MFA and RTPA) did require states, the U.S. Supreme states to provide taxpayers with compliance software so they can comply with the law. Court, Congress, and SHOULD WE TAX E-COMMERCE JUST merchants—involved LIKE OTHER SALES? Compliance Costs: Empirical Evidence in the online sales tax The economic literature examining sales Online merchants’ biggest challenge against discussion have large taxation of online purchases generally finds e-commerce taxation is the compliance interests at stake. two key factors to consider: behavioral costs. There are not a lot of studies that responses and compliance costs.32 estimate the exact dollar amount of these Several studies find large behavioral costs. However, existing studies generally responses to sales tax on online transactions. indicate that, as a percentage of taxes In other words, people who avoid taxes by collected, smaller firms incur a heavier making purchases online are highly price burden than their larger counterparts. sensitive.33 In addition, there is evidence A 2007 study of sales tax compliance showing that if online transactions are costs indicated that these costs did not taxed just like local sales, people will move increase significantly with the number of away from these online purchases, and the nexus states.35 Compliance costs are about 3 magnitude of their behavioral change might percent of taxes collected on average,36 but be bigger than if they faced the same amount they are not evenly distributed across firms of tax increase on in-store purchases. Larger of different sizes—the sales tax compliance behavioral changes entail higher efficiency costs were 13.5 percent of taxes collected costs to the economy. Because taxes on for small retailers, 5.2 percent for median e-commerce have a greater distortionary retailers, and 2.2 percent for large retailers. effect than taxes on in-store sales, a lower These numbers translate to 0.82 percent, tax on e-commerce is justified to ensure 0.32 percent, and 0.13 percent of taxable equi-proportionate changes, which is more sales for small, median, and large retailers, desirable from an efficiency perspective. respectively. In other words, the compliance From a compliance costs perspective, costs will represent a larger share of profits these tax collection requirements essentially for smaller sized firms.37 impose additional costs on buyers and sellers and therefore induce behavioral changes. To WHAT IS NEXT? avoid sales tax responsibilities, sellers could engage in entity isolation and avoid creating All four parties—states, the U.S. Supreme any nexus in certain states, and buyers could Court, Congress, and merchants—involved disguise their locations by having items in the online sales tax discussion have large delivered to a low-tax state instead of in their interests at stake: many states continue state of residence. to face budget shortfalls, and the fiscal 5 RICE UNIVERSITY’S BAKER INSTITUTE FOR PUBLIC POLICY // ISSUE BRIEF // 07.13.17

reality prompts these states to target online sales tax to meet revenue needs. The U.S. ENDNOTES Supreme Court has previously indicated the 1. Darla Mercado, “The holiday is over: potential need to revisit Quill. However, it Amazon will collect sales taxes nationwide has turned down multiple cases in part to on April 1,” CNBC, March 24, 2017, http:// avoid legislating from the bench. Congress www.cnbc.com/2017/03/24/the-holiday- has the power to resolve the issue, and is-over-amazon-will-collect-sales-taxes- some states hope that Congress will nationwide-on-april-1.html. “Nationwide” mandate a solution to end this prolonged refers to the 45 states where there is a state legal battle. Finally, the merchants, both sales tax. Amazon will also collect sales online and traditional ones, have distinct taxes in the District of Columbia and Alaska. positions on this issue. What could happen Alaska does not have statewide sales tax, next, and what are the consequences? but its cities have municipal sales taxes that One possibility is that Congress may Amazon will collect. reach an agreement before any case reaches 2. Chris Isidore, “Amazon to start the U.S. Supreme Court. Any congressional collecting state sales taxes everywhere,” agreement that would grant states the CNN, March 29, 2017. http://money.cnn. authority to tax remote sales would also com/2017/03/29/technology/amazon- involve simplifications in state sales tax sales-tax/index.html. systems and enhanced coordination across 3. Jonathan Hadad, “E-commerce states, which would alleviate compliance & Online Auctions in the U.S.,” IBISWorld burdens. However, Congress has many Industry Report 45411a, IBISWorld, April 2017. other major proposals on its plate, such as 4. Organisation for Economic an overhaul of the tax code and a repeal Co-operation and Development, Addressing and replacement of the Affordable Care Act, the Tax Challenges of the Digital Economy, which may prevent any online sales tax Action 1 – 2015 Final Report, OECD/G20 agreement from being formulated in 2017. Base Erosion and Profit Shifting Project Another possibility is that the U.S. (Paris: OECD Publishing). The business Supreme Court accepts a case for review models identified by this publication include and ultimately makes a decision modifying e-commerce, online payment services, app Quill. However, if the Supreme Court simply stores, online advertising, cloud computing, rules that Quill is unconstitutional, it still is high frequency trading, and participative not immediately clear how online retailers network platforms. We focus our discussion are going to be taxed and whether Congress on e-commerce in this brief. is going to take action at that point. On 5. IBISWorld, “E-commerce sales,” the other hand, if the Court upholds Quill, IBISWorld Business Environment Report, states may continue to pursue other IBISWorld, May 2016. creative extensions of the sales tax nexus, 6. U.S. Census Bureau, E-Stats 2015: or impose reporting requirements as in the Measuring the Electronic Economy (Suitland, Colorado law. MD: U.S. Census Bureau), May 24, 2017. Before any resolution is reached, one https://www.census.gov/content/dam/ thing is certain. States will either continue Census/library/publications/2017/econ/e15- to push for the ability to tax remote sellers, estats.pdf. mandate that non-collecting remote 7. An industry analysis reported that the vendors report buyers’ purchases to the e-commerce and online auction industry is states, encourage online merchants to expected to generate $394 billion in revenue voluntarily collect and remit sales taxes to in the United States in 2017. See Jonathan the states, or even start asking the third Hadad, “E-commerce & Online Auctions in party merchants who use other sellers’ the U.S.” online marketplace platforms to pay sales 8. Many local governments also rely taxes. Some will be successful, while others heavily on general sales tax as a major will keep state courts busy. revenue source. However, because their

6 E-COMMERCE: RECENT DEVELOPMENTS IN STATE TAXATION OF ONLINE SALES

taxing authority generally comes from the in 2011, 2013, and 2015. See http:// state, we focus our discussion on the state marketplacefairness.org. level in this brief. 18. The RTPA was first introduced in 2015. 9. Lucy Dadayan and Donald Boyd, State 19. SSUTA is a multi-state effort to Revenue Report #106 (New York: The Nelson simplify sales and use tax collection and A. Rockefeller Institute of Government), administration by retailers and states. It March 2017, http://www.rockinst.org/ encourages remote sellers to collect taxes pdf/government_finance/state_revenue_ on sales to customers living in the member report/2017-03-09-srr_106.pdf. states. A seller that registers under the 10. See, for example, David Agrawal and Agreement must collect sales and use tax William Fox, “Sales Tax in an E-commerce for all member states. For details, see http:// Generation,” International Tax and www.streamlinedsalestax.org/. Public Finance (September 2016): 1-24. 20. Gale Cole, “Bill to fight online sales doi:10.1007/s10797-016-9422-3; William tax introduced in Congress,” Avalara, Inc., Fox, “Sales and Excise Taxes,” in Oxford July 18, 2016. https://www.avalara.com/ Handbook on State and Local Finance, eds. blog/2016/07/18/bill-to-fight-online- Robert Ebel and John E. Peterson (Oxford sales-tax-introduced-in-congress/. University Press: New York, 2012); and 21. Pub. Act 098-1089. Michele E. Hendrix and George Zodrow, 22. For a detailed discussion about the “Sales Taxation of Services: an Economic timeline of the legal development of these Perspective,” Florida State University Law cases, see Bill Cunningham, Mo Bell-Jacobs, Review 30 (Spring 2003): 411-433. Brian Kirkell, and Catahrin Del Re, What is 11. Remote sales generally include the deal with sales and use taxes on remote e-commerce (online) and mail order purchases? (Chicago: RSM, LLP), July 28, (catalogue) sales, and e-commerce sales 2016, http://rsmus.com/what-we-do/ are more than twice as large as the mail services/tax/state-and-local-tax/sales- order sales. and-use-tax/whats-the-deal-with-sales- 12. Agrawal and Fox, “Sales Tax in an and-use-tax-on-remote-purchases.html. E-commerce Generation.” 23. The distinction between click through 13. Quill Corp. v. North Dakota, 504 U.S. nexus and affiliate nexus is not exactly 298 (1992). Quill Corporation was acquired consistent across different data sources. by Staples, Inc. in 1998 and has been one of Some articles viewed click through nexus as Staples’ subsidiaries. part of a broadly defined affiliate nexus. 14. Uncollected Sales and Use Tax from 24. A detailed description is included Remote Sales: Revised Figures (March 2017) in Alabama Code Title 40. Revenue (Washington, D.C.: National Conference of and Taxation §40-23-68. http:// State Legislatures; New York: International alisondb.legislature.state.al.us/alison/ Council of Shopping Centers), http://www. codeofalabama/1975/40-23-68.htm. efairness.org/files/Updated Sales Tax Loss 25. Newegg Inc. v. State of Alabama, Report.pdf. Department of Revenue, Alabama, Tax Trib., 15. Total sales tax revenue figure taken No. 16-613, status conference 4/20/17. from: Lucy Dadayan and Donald Boyd, State 26. South Dakota v. Wayfair, Inc., D.S.D., Revenue Report #106 (New York: The Nelson No. 3:16-CV-03019, 1/17/17. A. Rockefeller Institute of Government, 27. DMA is now Data & Marketing March 2017). Association, a trade organization for data- 16. At the time this brief was being driven markers. drafted, Amazon announced its acquisition 28. Vermont, South Dakota, Oklahoma, of Whole Foods Market on June 16, 2017. Kentucky, Tennessee, and South Carolina Although the final corporate structure is have similar reporting requirements. unclear at this point, this may potentially 29. Multistate Tax Commission, Use Tax create nexus for Amazon in more states. Information Reporting Work Group, http:// 17. The MFA, often referred to as www.mtc.gov/Uniformity/Project-Teams/ the e-fairness law, was also introduced Model-SU-Notice-and-Reporting-Statute. 7 RICE UNIVERSITY’S BAKER INSTITUTE FOR PUBLIC POLICY // ISSUE BRIEF // 07.13.17

30. Governor Andrew Cuomo proposed a measure that would require online AUTHOR marketplaces to collect sales taxes when Joyce Beebe, Ph.D., is a fellow in public they facilitate sales to New Yorkers from finance at the Baker Institute. Her sellers in and outside of the state. This research focuses on tax reforms in the measure was opposed by the Senate. U.S. and computable general equilibrium 31. In Texas, the Senate approved a modeling of the effects of tax reforms. Her modified version of the bill that originally other research interests include wealth intended capture the online sales, now accumulation over a person’s lifetime and, requesting State Comptroller to study the generally, how public policies influence sales and use tax compliance. This bill did decision-making. not pass House before the end of the 85th legislative session. 32. Most literature did not distinguish between the local government’s administrative costs and the companies’ compliance costs; we generally refer to these costs as “compliance costs” in this brief. 33. Agrawal and Fox, “Sales tax in an e-commerce generation.” For a complete list of studies reviewed by Agrawal and Fox, see page 5 of the study. 34. George Zodrow, “Optimal Commodity Taxation of Traditional and Electronic Commerce,” National Tax Journal (2006) 59: 7-31. 35. PriceWaterhouseCoopers, “Retail See more issue briefs at: Sales Tax Compliance Costs: A National www.bakerinstitute.org/issue-briefs Study,” Joint Cost of Collection Study, June 1, 2007. This publication was written by a researcher (or researchers) who 36. Donald Bruce and William F. Fox. participated in a Baker Institute project. An Analysis of Internet Sales Taxation and Wherever feasible, this research is the Small Seller Exception (Washington, reviewed by outside experts before it is D.C.: Office the Advocacy, Small Business released. However, the views expressed Administration), November 2013. herein are those of the individual author(s), and do not necessarily 37. Smaller retailers are retailers with represent the views of Rice University’s annual sales of more than $150,000 but less Baker Institute for Public Policy. than $ 1 million, median retailers are retailers with annual sales of more than $1 million © 2017 Rice University’s Baker Institute but less than $10 million, and large retailers for Public Policy are retailers with annual sales of over $10 This material may be quoted or million. All data cited from the PwC study, reproduced without prior permission, which was based on 2003 information. provided appropriate credit is given to the author and Rice University’s Baker Institute for Public Policy.

Cite as: Beebe, Joyce. 2017. E-Commerce: Recent Developments in State Taxation of Online Sales. Issue brief no. 07.13.17. Rice University’s Baker Institute for Public Policy, Houston, Texas.

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