Online shopping can redistribute local tax revenue from urban to rural America

Research output: Contribution to journalArticlepeer-review


What is the effect of e-commerce on the geographic distribution of local sales tax revenues? Using COVID-19 as a shock to online shopping and hand-collected high-frequency data on local sales tax revenue, we document an important shift in the state and local public finance landscape. As e-commerce increases, a destination basis for remote sales taxes results in higher growth in local sales tax collections in smaller, generally more rural jurisdictions. This increase comes at the expense of larger urban retail centers, which previously enjoyed an origin basis for sales tax collections. As households replace in-person commerce with online shopping, sales taxes no longer accrue to urban centers with large concentrations of retail establishments and instead expand the tax base of smaller jurisdictions. State-level reforms that enforce sales tax compliance generally mitigate the revenue falls in larger jurisdictions and amplify the increases in smaller jurisdictions.

Original languageEnglish
Article number104818
JournalJournal of Public Economics
StatePublished - Mar 2023

Bibliographical note

Funding Information:
☆ We are grateful to the editor, Owen Zidar, and four anonymous referees for feedback that improved the paper. We benefited from comments by Richard Beem, Robert Bifulco, Leah Brooks, Jan Brueckner, Gregory Burge, Jeffrey Clemens, William Fox, William Hoyt, Samsun Knight, Justin Ross, Nathan Seegert, David Sjoquist, Kirk Stark, Keith Teltser, Mark Tremblay, Stan Veuger, Caroline Weber, and David Wildasin, as well as conference/seminar participants at the Association for Budgeting and Financial Management, the Urban Economics Association, and the University of Kentucky. We thank Richard Beem for sharing data on the sales tax base breadth with us. Any remaining errors are our own. We are grateful to our research assistants, Yunjun Kim, Samuel Owens, and Lucas Taulbee for their help in assembling the tax revenue database.

Publisher Copyright:
© 2023 Elsevier B.V.


  • COVID-19
  • e-Commerce
  • Online shopping
  • Sales tax
  • Tax revenue

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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