International Tax and Public Finance

, Volume 24, Issue 5, pp 903–926 | Cite as

Taxes in an e-commerce generation

Policy Watch


Rapid growth in e-commerce has altered the ability of jurisdictions to enforce commodity taxes on a destination basis. This results in different effective tax rates depending on the way in which goods and services are purchased and the characteristics of both the products and the sellers. We discuss the arguments for the destination principle as the appropriate place-of-taxation rule for consumption taxation of cross-border trade. We analyze various recent reforms to the value-added tax in the European Union in response to e-commerce. We then examine various policy options in the USA—maintaining the status quo, changing nexus rules, states adopting information reporting, and national reforms that require firms to remit taxes regardless of physical presence—and relate them to the recent European reforms. We conclude based on our analysis and the recent European Union experience that reforms at the national level appear to be the important next step to enforcing commodity taxes at destination in the USA.


Destination taxation Origin taxation Commodity taxes Online shopping E-commerce Tax competition Digital products 

JEL Classification

H2 H7 L81 R5 



The authors are grateful to Nathan Anderson, Richard Bird, John Brooks, Walter Hellerstein, Jeffery Hoopes, Matthew Murray and David Wildasin as well as participants at the National Tax Association Conference on Taxation for comments on earlier drafts of the paper. The comments of two anonymous referees and the editor, Albert Solé-Ollé, improved the paper. A longer version of this paper containing more US-specific institutional details and more extensive literature coverage was titled “Sales Taxes in an e-Commerce Generation” and is available online or from the authors. The authors are responsible for all remaining errors.


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Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  1. 1.Department of Economics, Martin School of Public PolicyUniversity of KentuckyLexingtonUSA
  2. 2.CESifoMunichGermany
  3. 3.Boyd Center for Business and Economic ResearchUniversity of TennesseeKnoxvilleUSA

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