Sales Tax Collection Requirements and Firm Location Decisions: Evidence from Wayfair

This study examines the effects of sales tax collection requirements on firm location decisions following a U.S. Supreme Court decision (South Dakota v. Wayfair, Inc.) that newly permits states to compel out-of-state sellers to collect sales tax. Given concerns that pre-Wayfair rules distorted economic activity by incentivizing remote sellers to locate in fewer states, I examine firm location choices around the decision. Using establishment-level data in a difference-in-differences framework, I do not find evidence of remote sellers broadly entering new states shortly after Wayfair. However, conditional on expanding to new states, remote sellers are approximately 11 percent more likely to enter high-sales-tax states in the near term after the case relative to traditional retailers, consistent with firms considering sales tax collection in their location decisions. Data Availability: Data used in this study are publicly or commercially available from the sources identified in the text. JEL Classifications: H25; H71; R39.