Evidence on Sales Tax Revenue Erosion in Florida from E-commerce

Abstract: Despite the public attention on the threat to sales and use tax revenues from electronic commerce, details on the current impact are limited. In this paper, the state and local sales tax bases in Florida are examined for an e-commerce effect. The data indicate strong revenue growth across much of the state and some anecdotal evidence that high-profile sales categories, with strong competition from e-commerce firms, are not matching the growth in the overall base. More systematic analysis, using four criteria for a local market decline to e-commerce, however, does not indicate a clear revenue growth disruption that can be associated with the new transactions. A more fundamental problem is the uncertainty in determining the tax revenue growth path without electronic commerce and the obscurity of this path will probably impede discussions on sales and use tax policy.