The holiday season looks a bit different these days. Gone are the long lines of consumers waiting outside of box stores to get the best deals, which have mostly been replaced by online promotions throughout the holiday season. With all these changes, we’ve seen an uptick in omnichannel commerce in recent years as consumers seek more convenience and options when shopping. While this shift to omnichannel opens new opportunities for retailers to reach and sell to customers, it has also created new tax obligations that many may not even know exist.

Some retailers may be new to ecommerce, while others may be juggling sales across in-person and online platforms for the first time. With any change or expansion into new channels, platforms, or geographies likely comes new tax obligations for retailers to contend with. As retailers work to fulfill holiday orders in-store and online, and get those purchases to customers via shipping, in-store and curbside pickup, and other delivery methods, there are several tax considerations they should be prepared for, including:

Expanded tax obligations from online sales

From the US to the EU, new ecommerce tax rules impose additional obligations on retailers. For many retailers, the holiday season could be their first time selling online and facing these rules. In the US today, 44 states have active economic nexus laws, which require sellers to register, collect, and remit sales tax on remote sales. For retailers selling online, economic nexus laws could exponentially expand their sales tax obligations, especially if sales grow during the holiday season.

Aside from the breadth of potential obligations, each state defines their own rules when it comes to triggers on economic nexus obligation. For example, if you have $250,000 or more in sales in Alabama, you have an obligation, whereas in neighboring Georgia $100,000 or more in sales or 200 transactions in the state triggers an obligation.

Cross-border compliance from international sales

Selling online makes selling internationally easier but makes compliance more complex. For retailers selling outside of their home country, understanding the tax types and customs obligations in advance helps reduce shipment delays and risk.

Nearly every country has different definitions for everything from Harmonized System (HS) codes to tariffs to shipping costs. Because of this, retailers selling across borders must know the rates and rules specific to each country they are selling into, which can be difficult to do especially as the number of countries a retailer sells into increases and as rates and rules continue to change. For example, Mexico has historically used eight-digit HS codes since the Harmonized System was created in 1988, but as of December 2020, Mexico’s HS codes must contain 10 digits. The country also added new tariff codes for new products and eliminated codes for rarely traded goods.

Cross-border sellers must also be able to provide transparency at checkout. Some retailers are tempted to omit these fees at checkout due to complexity, but surprising customers with costly fees on delivery is never a good experience.

Tax nuances from BOPIS and pickup options

Due to the pandemic, we saw more consumers use flexible shopping and delivery options, like curbside pickup and local delivery. As a result, retailers had to embrace new technologies and processes to enable blended shopping experiences. In some cases, these types of transactions could create new tax obligations. For example, purchases made online and picked up in different locations could have a different tax rate depending on state and local rules.

Additionally, the omnichannel nature of blended shopping experiences puts added pressure on retailers to manage tax across a number of systems and channels. This requires the ability to calculate accurate tax rates across channels and aggregate tax information from several sources to stay compliant.

The holiday season is already in full swing. As retailers focus on managing everything from customer experience across channels to shipping challenges amid supply chain delays, tax should also be top of mind. If your business is selling online for the first time, reaching customers in new geographies, or adopting new channels, there’s a good chance your tax obligations are changing as we speak. Enlisting technology to manage changing compliance requirements as your business grows can help you stay compliant, while also avoiding barriers for growth, creating positive customer experiences, and more.


Stay Connected

Join over 100,000 of your peers and receive our weekly newsletter which features the top trends, news and expert analysis to help keep you ahead of the curve.