A recurring challenge for policymakers is understanding who bears the burden of a tax. For any tax, there is both the person who legally is required to pay and the person who bears the cost due to higher prices or lower take-home pay. The difference is between the legal and economic incidence of a tax. For a sales tax, a retailer would be required to collect and pay the tax (legal incidence). However, the shop’s customers may face higher prices because of the tax (economic incidence). It is sometimes difficult to parse out the difference between legal and economic incidence, but a recent case is rather simple. France recently introduced a 3 percent digital services tax on revenues generated from sales of user data, digital advertisements, and online platforms run by large companies. Following the enactment of the tax, Amazon France has now decided that it will increase prices faced by vendors using its online marketplace. Starting October 1, 2019, Amazon will increase its commission rate on businesses selling on Amazon’s French marketplace by 3 percent. For instance, a vendor selling a watch worth €100 on Amazon’s online platform in France currently faces a 15 percent, or €15.00, commission rate. This 15 percent sales charge will increase by 3 percent to 15.45 percent, resulting in a new sales charge of €15.45 on the €100 watch. Even though the French tax is targeted at Amazon and other large digital firms, in this case it will be Amazon’s French vendors who will bear the burden of the tax. This increase in the commission rates comes as little surprise. Because the tax is levied on the revenues generated through the marketplace, it should have effects similar to a sales tax or value-added tax (VAT). Economic research shows that these types of taxes are generally passed on to consumers. As Amazon’s marketplace does not sell directly to consumers but instead operates as an intermediary, that means passing the tax on to the vendors using its marketplace. The online vendors may, in turn, pass at least part of the increased commission rates on to consumers through higher prices. An economic impact assessment of the French digital services tax shows that about 55 percent of the total tax burden will be passed on to consumers, 40 percent to online vendors, and only 5 percent borne by the digital companies targeted by the new tax. In the past, similar taxes on online products have been passed on to consumers. For instance, Australia introduced a 10 percent goods and services tax on digital downloads in 2017, called “Netflix Tax.” As a response, Netflix increased its prices to cover the tax and added additional charges on top of that, effectively increasing prices on Netflix by more than 10 percent. When discussing the proposal, the French finance minister Bruno Le Maire said, “We are implementing a digital tax on digital giants because we think it is a fair and efficient way of taxing them.” As Amazon, and likely other digital companies, pass the tax on to online vendors and ultimately consumers, the outcome might differ from what the French government had in mind when implementing the tax. France is not alone in pursuing a digital services tax, and French policymakers will not be the last to learn the difference between the legal and economic incidence of a tax. Stay Updated on Tax Issues Around the World Select Country United States Aaland Islands Afghanistan Albania Algeria American Samoa Andorra Angola Anguilla Antarctica Antigua And Barbuda Argentina Armenia Aruba Australia Austria Azerbaijan Bahamas Bahrain Bangladesh Barbados Belarus Belgium Belize Benin Bermuda Bhutan Bolivia Bonaire, Saint Eustatius and Saba Bosnia and Herzegovina Botswana Bouvet Island Brazil British Indian Ocean Territory Brunei Darussalam Bulgaria Burkina Faso Burundi Cambodia Cameroon Canada Cape Verde Cayman Islands Central African Republic Chad Chile China Christmas Island Cocos (Keeling) Islands Colombia Comoros Congo Cook Islands Costa Rica Cote D'Ivoire Croatia Cuba Curacao Cyprus Czech Republic Democratic Republic of the Congo Denmark Djibouti Dominica Dominican Republic Ecuador Egypt El Salvador Equatorial Guinea Eritrea Estonia Ethiopia Falkland Islands Faroe Islands Fiji Finland France French Guiana French Polynesia French Southern Territories Gabon Gambia Georgia Germany Ghana Gibraltar Greece Greenland Grenada Guadeloupe Guam Guatemala Guernsey Guinea Guinea-Bissau Guyana Haiti Heard and Mc Donald Islands Honduras Hong Kong Hungary Iceland India Indonesia Iran Iraq Ireland Isle of Man Israel Italy Jamaica Japan Jersey (Channel Islands) Jordan Kazakhstan Kenya Kiribati Kuwait Kyrgyzstan Lao People's Democratic Republic Latvia Lebanon Lesotho Liberia Libya Liechtenstein Lithuania Luxembourg Macau Macedonia Madagascar Malawi Malaysia Maldives Mali Malta Marshall Islands Martinique Mauritania Mauritius Mayotte Mexico Federated States of Micronesia Republic of Moldova Monaco Mongolia Montenegro Montserrat Morocco Mozambique Myanmar Namibia Nauru Nepal Netherlands Netherlands Antilles New Caledonia New Zealand Nicaragua Niger Nigeria Niue Norfolk Island North Korea Northern Mariana Islands Norway Oman Pakistan Palau Palestine Panama Papua New Guinea Paraguay Peru Philippines Pitcairn Poland Portugal Puerto Rico Qatar Republic of Kosovo Reunion Romania Russia Rwanda Saint Kitts and Nevis Saint Lucia Saint Martin Saint Vincent and the Grenadines Samoa (Independent) San Marino Sao Tome and Principe Saudi Arabia Senegal Serbia Seychelles Sierra Leone Singapore Sint Maarten Slovak Republic Slovenia Solomon Islands Somalia South Africa South Georgia and the South Sandwich Islands South Korea South Sudan Spain Sri Lanka St. Helena St. Pierre and Miquelon Sudan Suriname Svalbard and Jan Mayen Islands Swaziland Sweden Switzerland Syria Taiwan Tajikistan Tanzania Thailand Timor-Leste Togo Tokelau Tonga Trinidad and Tobago Tunisia Turkey Turkmenistan Turks & Caicos Islands Turks and Caicos Islands Tuvalu Uganda Ukraine United Arab Emirates United Kingdom Uruguay USA Minor Outlying Islands Uzbekistan Vanuatu Vatican City State (Holy See) Venezuela Vietnam Virgin Islands (British) Virgin Islands (U.S.) Wallis and Futuna Islands Western Sahara Yemen Zambia Zimbabwe Email + Advertising By subscribing, you agree to be contacted by the Tax Foundation. We respect the privacy of all our subscribers and you can learn more about our privacy policy here.