Local sales tax rate differentials are evaluated in a theoretical model allowing
for increasing cost industries and consumer transportation cost. It is shown that
the tax rate differential variables used in previous research lead to an
underestimate of the effects onjurisdiction sales and that the effects should vary
by commodity type. Evidence for the District of Columbia metropolitan area
partially confirms previous research findings that local tax rate differentials
significantly affect sales locations, although ways of reducing this effect are
indicated.
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