The Effect Of Levying Taxes On Sales And Customer Purchase Behavior Online

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Effect of Levying Taxes on Sales and Customer Purchase Behavior Online (Difference-in-differences estimation) Section 1: Statement of Policy/Research Question The advent of the internet led to an alternative platform for buying and selling goods. If sales tax is applicable only to goods sold outside of the internet, it would be interesting to see if that means people inclined to making purchases online where they would not need to pay sales tax. We want to see if there is a causal relationship between the tax levied and the change in customer behavior with respect to a purchase (sensitivity), i.e., whether or not the customer will make that purchase or the change in the probability of the customer making the purchase. Section 2: Background on the Policy/Research Question One scenario to consider would be the one mentioned above wherein we try to analyze the change in customer/buyer’s behavior with respect to purchases online versus offline. Another would be to see if, within the realm of online shopping, they prefer to or are more likely to buy from in-state sellers compared to out-of-state sellers. Most of the online transactions occur across state borders with widely varying sales tax rates. And the law mandates that sales tax be collected from buyers if they make purchases online from sellers who happen to be from the same state. If the seller is not from the same state as the buyer, he cannot be compelled to collect tax on the buyer’s purchase. Thus, this suggests
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