Holiday shopping can be a time of mixed emotions for retailers. While they may be grateful for the increased sales the season brings, more purchases mean more sales tax responsibilities for them to worry about.

It has been over three years since the Wayfair online sales tax decision, and all states with a general sales tax have implemented some sort of economic nexus law. If they’re not prepared, retailers, especially those without a dedicated accounting department, can be caught off guard by the additional online sales tax responsibilities days like Cyber Monday can bring.

Keep reading to learn more about how Wayfair laws affect Cyber Monday and the negative side effects online holiday shopping can have on small retailers.

Cyber Monday And Wayfair Laws

Now that all states with general sales tax legislation have enacted online sales tax laws as of earlier this year, there is concern that the increased tax burden may outweigh the benefits of increased online sales.

According to Adobe, Cyber Monday 2020 was the biggest online shopping day in U.S. history, with customers spending 10.8 billion dollars online.  As the ongoing COVID-19 pandemic has seen many customers continuing to prefer online shopping, 2021 is expected to exceed these numbers.

So, what new tax responsibilities does this increased revenue bring to small companies?

The Impact Of Holiday Shopping On Small Retailers

With small businesses already dealing with the combination of  extra tax liabilities resulting from the COVID-19 pandemic and Wayfair legislation, they may be overwhelmed even when it is not a busy holiday season.  According to a recent study, 98 percent of accountants who responded believe that small businesses are not meeting all of the online sales tax laws they are liable for.   At Miles Consulting Group, we are contacted every day by either middle market companies or smaller retailers who are not in full compliance with the responsibilities in each state.

A December 2020 study found that just 42 percent of small business owners felt they were completely compliant with Wayfair laws.

Small businesses may find themselves reaching nexus in states where they haven’t before. As a result, they will now need to register to collect and remit sales tax in  those states. In this case, being prepared ahead of time is crucial. If you are close to reaching nexus in a certain state before the holiday season officially begins, it may be beneficial to apply for a sales tax permit. Staying prepared and up to date is key to ensuring tax compliance. If you are a small business who needs extra help, consider reaching out to us at Miles Consulting Group.

Have a question? Contact Monika Miles, Miles Consulting.