Study indicates broadband does not lower tax collections

Published: October 31, 2011

Increased broadband does not lead to lower tax collections, indicates a study in Oklahoma about the relationship between broadband adoption and local retail sales tax collections.

With broadband access becoming more common, some question the impact on the local retail sector, especially in rural areas. Despite lower online prices and the lack of an effective sales tax for online purchases, growing e-commerce purchases do did not seem to negatively impact local retail sales and decrease local tax revenue.

The study showed that e-commerce comprises a very small portion of the total retail market and most consumers use the Internet to research a product before ultimately buying offline.

The Oklahoma Daily Yonder reported:

Many politicians and main street / chamber of commerce organizations have been leery of increased Internet usage in their areas, fearing that local customers will begin shopping online and ultimately diminish the local tax base. Using Oklahoma data to study the relationship between broadband adoption and local retail sales tax collections, we found that increased broadband does not, in fact, lead to lower tax collections.

Instead, we found that tax rates and poverty rates are the features that markedly affect whether sales tax collections rise or fall.

As broadband Internet access becomes more common across the country, this technology has generally been heralded as positive for opportunities it can offer in commerce, education, and entertainment. But the impact of broadband on local retailing– and on the tax income derived from local sales – have been unclear.

Click here to read the full article on the Daily Yonder.

Click here to read the study in US Regional Science Policy & Practice.