The Effect of Sunday Sales Bans and Excise Taxes on Drinking and Cross– Border Shopping for Alcoholic Beverages

85 National Tax Journal Vol. LX, No. 1 March 2007 Abstract State excise taxes and Sunday sales bans are important interventions in the markets for beer and spirits. This paper estimates the effect of these policies on within–state and cross–state purchases of beer and spirits for 50 states plus the District of Columbia over the period 1990–2004. The results indicate that while demand for both spirits and beer appears to be quite price elastic, 20 to 40 percent of the elasticity for spirits is due to displacement of sales across state borders rather than decreases in own–state drinking. The paper also fi nds that although repeal of a Sunday sales ban leads to an increase in the sale of spirits, much of the increase in sales of beer is due to a continuation of pre–existing trends in those states that repealed their bans. Approximately 80 percent of the increase in sales of spirits that results from repealing a Sunday ban on spirits is due to an increase in own–state drinking, while the remaining 20 percent is due to changes in cross–border shopping.