Response to New Approaches for Collecting the Use Tax from Consumers

• In Event: Emerging and Innovative Research Session

Abstract

State governments rely largely on voluntary reporting by consumers to collect use taxes. When goods are purchased from a vendor that lacks nexus within a state, the state cannot require the vendor to collect the tax. Thus, many mail-order and Internet purchases remain effectively tax-free. States have taken steps to try and increase use tax compliance. Many support federal legislation that does not require a physical presence standard, some require retailers to report information to consumers about their purchases and the use tax requirement, and others include a separate line on the state's individual income tax return. This study will examine, in an experimental setting, the effectiveness of the two non-legislative methods. Participants will complete a forced-choice purchase transaction that will be subject to a voluntarily-reported transaction fee (i.e., use tax). As a treatment variable, we provide various reporting formats that remind subjects that the transaction fee exists or instruct subjects how to report their transaction fee. We hypothesize that subjects receiving information relating to the value of their purchases and the related transaction fee will report more transaction fees than those not receiving the information. We also hypothesize that subjects given a reporting form that includes information about the transaction fee and how to calculate the fee will report more transaction fees than those not receiving any information about the transaction fees.

Authors

• Robert A Seay, Tennessee Tech University

• Mary E. Howard, Tennessee Tech University

• Ryan Seay, University of Mississippi