nce that taxes impact online buyingdecisions and shows it to be highly robust. Section IV examines the mail-order/Internetdistinction for the case of computer purchases. Section V gives policy simulations of proposedtaxes on Internet commerce as well as some discussion of the longer-run role of sales taxes.Section VI concludes.II. Data and SpecificationA. DataA major problem with doing empirical work on Internet commerce has been data.Aggregate data is not very useful. Observing that Internet sales are high in places with high taxesmay just indicate that places with high taxes have higher incomes, higher computer ownership,higher education, or any number of factors that are correlated with online buying. Individual dataare extremely important but few consumer surveys even ask about the Internet and if they do, it ishard to get sufficient sample sizes. In any random sample of the population, less than half therespondents are likely to have computers. Of those, only a fraction have Internet access and onlya small share of those have ever bought something online. To examine the response of suchpurchases to local taxation then requires further dividing up the Internet shoppers by geographiclocation. It is easy to see why this will tend to yield small samples.In this paper, I turn to an extensive private survey conducted in late 1997 for ForresterInc., a market research company in Cambridge, Massachusetts. The survey was conducted by theNPD group and is meant to provide a nationally representative portrait of the computer andഊ6technology decisions of more than 110,000 consumers. The survey includes detailed informationabout various demographic characteristics such as income, age, gender, education, as well as thestate and metropolitan area of residence.8The information covers the ownership of computers, aswell. About 45% of the respondents had computers at the time of the survey. Those ownerswere then asked whether they had online acce...
