Question: Until 2012 California Texas and Pennsylvania required firms to collect
Until 2012, California, Texas, and Pennsylvania required firms to collect sales taxes for online sales if the chain had a physical presence ( a “ brick” store as opposed to a “ click” store) in those states. Thus, those states collected taxes on Best Buy’s online sales, because it had stores in each of those states, but they did not collect taxes from Amazon. com because it did not have physical locations in those states. Starting in 2012, Amazon had to pay taxes in these states. After the tax was imposed on Amazon, Best Buy had a 4% to 6% increase in its online sales in those states relative to the rest of the chain (www.bizjournals.com/twincities/news/2013/01/11/best-buys-news/2013/01/11/best-buys-online-sales-up-in-states.news/2013/01/11/best-buys-online-sales-up-in-states.html). Use an indifference- curve/ budget- line diagram to show why Best Buy’s sales rose after taxes were imposed on Amazon.
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