There is something different about the state sales tax, or so it seems based on judicial decisions creating unique jurisdictional and apportionment standards for the tax. This article explores the concept of "sales tax exceptionalism," and assesses whether the special treatment afforded to the sales tax is justified by the theoretical foundations of the tax. In particular, the article examines whether theoretical justifications exist for the jurisdictional standard applied to the sales tax (a "physical presence" standard) as compared to the "economic presence" standard applied to the corporate income tax. Ultimately, the article concludes that only weak theoretical justifications support the different jurisdictional standards, and that recent changes to many states' corporate income taxes further undercut the notion of "sales tax exceptionalism."
We analyze the choice politicians face when seeking votes from groups that lobby for sales tax rate decreases or from groups that lobby for certain tax exemptions, given the constraint that politician wants to raise a certain amount of revenue. Using the application of sales taxes and sales tax exemptions we develop a model predicting a positive relationship between the number of sales tax exemptions and the sales tax rate. We find support for the hypothesis that there is an equilibrium relationship between tax rates and exemptions. We find that a one-unit increase in the number of exemptions is associated with an increase between 0.10 and 0.25 percent increase in the sales tax rate.
We analyze the choice politicians face when seeking votes from groups that lobby for sales tax rate decreases or from groups that lobby for certain tax exemptions, given the constraint that politician wants to raise a certain amount of revenue. Using the application of sales taxes and sales tax exemptions we develop a model predicting a positive relationship between the number of sales tax exemptions and the sales tax rate. We find support for the hypothesis that there is an equilibrium relationship between tax rates and exemptions. We find that a one-unit increase in the number of exemptions is associated with an increase between 0.10 and 0.25 percent increase in the sales tax rate.
Abstract Currently, sales taxes are imposed at both the state and local levels in 37 US states. In these environments, vertical tax competition occurs as governments share a common sales tax base, and local jurisdictions have autonomy over sales tax rates. As cash-strapped states look to sales taxes for additional revenues, local governments may worry about potentially adverse revenue impacts, as consumers react to combined tax rate increases. This study examines state-municipal and county-municipal fiscal spillovers using an empirical approach that accounts for endogenous tax policy leadership and voter tax fatigue. Employing comprehensive longitudinal data from Oklahoma, we find that state tax hikes significantly crowd out future rate increases for the large group of jurisdictions that are designated as followers. Leader jurisdictions are not found to display crowd-out tendencies, a result that is consistent with recent work suggesting that leaders may be less influenced by vertical fiscal externalities than other jurisdictions.
In: American federationist: official monthly magazine of the American Federation of Labor and Congress of Industrial Organizations, Band 40, S. 126-133
The measure of the tax is as significant a problem in sales taxation as is assessment in ad valorem property taxation or the determination of net income for income taxation. It is the base for taxation. Sales taxes are creations of state statutes. The appendix presents a general summary of these statutes to show their provisions. Separate state excise taxes on cigarettes or spirits are not included within the scope of this paper, nor are taxes on selling, storing or distributing motor fuels or oils. These excises present special problems, as do separate taxes on extraction, oil drilling and mining. Only when these problems arise under a general sales tax will they be discussed here. Many sales taxes are inextricably tied to license or privilege taxes. If such a tax applies to broad areas of sales transactions, to several industries which are not confined to a specialized category, the tax will be considered herein. No attempt has been made in this paper to consider sales taxes imposed by the United States federal government, by any of its territories, by other nations or by their political subdivisions. Nor has attention been given to local taxes imposed by cities, counties, or townships except as these are an integral part of sales taxes which are uniform throughout the state. No discussion of property taxes, ad valorem taxes on intangibles, or net income taxes can be presented within the limits of this paper, even for purposes of analogy. General privilege or license taxes which vary directly in amount according to the taxpayer's dollar volume of sales will, however, be considered as sales taxes for our purposes. So will gross receipts or gross income taxes to the extent that they are applied to sales. Discussion of what constitutes a sale and what are transactions or occupations are presented elsewhere in this issue. The question here is: When a taxable sale is made, what is the amount upon which the tax rate is imposed?
