The Impact of Lookup Tables on Use Tax Reporting

Abstract

ABSTRACT This paper examines the anchoring effects that estimates of use tax provided by the state in the form of a “lookup table” have on use tax reporting. Results indicate taxpayers presented with a lookup table are significantly less likely to simply anchor on and report $0 for the amount of use tax due—currently the most commonly reported use tax amount. In addition, significantly more use tax was reported when an aggressive lookup table value (i.e., higher use tax estimate) was provided compared to a conservative lookup table value (i.e., lower use tax estimate) or when no table was available. By contrast, significantly less use tax was reported when a conservative lookup table value was provided compared to when no table was available. Finally, results indicate the anchoring effect of an aggressive lookup table value was magnified when taxpayers had greater uncertainty about the possible amounts of use tax due.