The Impact of Administrative Vigor on State Retail Sales Tax Compliance*

State general sales taxes represent the American approach to taxation of household consumption expenditures and make a substantial contribution to state government finances However, these taxes significantly deviate from the general tax on personal consumption idealized by economists because they tax many business purchases and exclude many household consumption purchases. No state levies the same general sales tax base as any other, causing wide variation in the extent to which tax coverage will approach that personal consumption ideal. There are wide differences across the states in the gap between the actual and the potential sales tax base, sometimes from differences in state economies, sometimes from differences in tax structures, and sometimes from differences in enforcement. The evidence identifies both the extent of base disparity and the importance of the structural variations in sacrificing revenue from the ideal. It estimates a considerable impact from stronger enforcement on collection efficiency. *Justin Ross and Denvil Duncan provided helpful comments on this paper.