We explore two remedies that could help states improve use-tax compliance. The first remedy is designed to reduce the amount of effort an individual must exert to pay the use tax by having the vendor give the individual an option to pay the use tax online. The second remedy focuses on increasing knowledge about the use tax by providing the individual with information about the use tax during the purchasing process.

The results from two states, Florida and Illinois, indicate that providing an individual with the option to pay the use tax increases the likelihood that the person will comply with the use-tax law. Providing information about the use tax, however, increases the likelihood of compliance only in Florida. Finally, there is a marginally significant interaction effect between the two remedies in Illinois.

This study makes three important contributions. First, this study offers policy makers two concrete and feasible solutions to the use-tax compliance problems for online transactions. Second, this study contributes to the academic literature by expanding the tax compliance literature into a relatively unexplored area. Finally, this study shows how use-tax compliance decisions and the effectiveness of potential remedies may vary from one state to another.

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