The explosion of online holiday shopping in and around Thanksgiving has evolved beyond conversational. It’s now expected – and getting bigger every year.
Online retail ruled Black Friday, Nov. 29, this year, even as in-person shopping dropped slightly. Adobe Analytics reported $10.8 billion in U.S. online sales on Black Friday, up 10.2% over last year – a record amount of spending on that day of the calendar.
Cyber Monday this year was expected to shatter previous online shopping records, even by the standards of the biggest online shopping day of the year: Consumers were expected to click away $13.2 billion on Dec. 2, the Monday immediately after Thanksgiving, 6.1% more than in 2023. Online spending was again expected to peak between 8 p.m. and 10 p.m. on Cyber Monday, reaching an estimated $15.7 million spent every minute.
(Cyber shopping for the holidays has become so pervasive that it’s become a recognized cause for workers to purposely work remotely to shop more freely online, with inflation and future tariffs spurring workers to buy more this year.)
Monitor your obligations
Such an eruption of shopping promises to tip some companies over the line of economic nexus in some states, meaning that suddenly those companies will have an obligation to collect and remit sales tax from customers in those states.
We generally recommend that companies begin monitoring their nexus requirements when sales reach $100,000 in a state. After that, set up a system to stay on top of your sales tax obligations, because the penalties of failing to do so can be severe.
First, determine the taxability of your products in a state – this can vary widely depending on what you sell and why and to what kind of buyer.
You’ll then need to register in the appropriate states where you think you’re nearing economic nexus (you might also need to consider the aspects of physical nexus, such as offices, warehoused inventory and even remote workers).
Maintain a tax calendar of where you’re registered for sales tax purposes, the filing frequency of each return, the e-file login credentials and other state-specific information.
Then prepare for filing with a process that includes the ability to prepare and file both online returns and paper returns and the ability to handle tax notices from states and other jurisdictions.
Believe us, once you hit nexus and begin filing, jurisdictions will be in touch.
TaxConnex provides services to become your outsourced sales tax department. If you think your business may be impacted by the ever-changing world of sales tax, contact TaxConnex today.
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