Black Friday and Sales Tax: Everything You Need to Know
October 22, 2024
As a seller or store owner in the U.S., you probably have a process for how to prepare for Black Friday. It’s the biggest shopping event of the year, which means more stock, more marketing, and hopefully a lot more sales. But there’s one thing you might not have given much thought to: how BFCM (Black Friday, Cyber Monday) can affect your sales tax obligations.
There’s a lot to consider when it comes to Black Friday and sales tax, especially if you’re selling in multiple states or online. Most significantly, increased sales volume can often mean increased thresholds for sales tax. In this post, we’ll explain:
Whether there is sales tax on Black Friday
How a sales spike can affect where you have nexus
What you should do to prepare
Is There Sales Tax on Black Friday?
Some states offer sales tax holidays for specific products at specific times of year e.g. no sales tax on clothing during back-to-school season. Unfortunately, this does not apply to Black Friday. Your transactions are subject to the same sales tax regulations as any other day of the year.
As a seller, you have to apply the appropriate sales tax rate to each order, based on where the customer is located. Sales tax rates vary by state, and local jurisdictions often impose taxes too. Most businesses use an automated calculation tool to guarantee compliance throughout the year.
Implications of Black Friday and Cyber Monday on Your Tax Obligations
Stores often experience a notable uptick in sales around Black Friday and Cyber Monday, whether in-store or online. This is great for business, but it also means your sales tax obligations could increase. The added sales might push you closer to reaching sales tax thresholds in states where you previously did not need to collect tax.
Nexus Monitoring
One key factor to keep in mind is sales tax nexus. Nexus refers to the connection between your business and a state that obligates you to collect and remit sales tax there.
You used to need a physical presence in a state to establish nexus there. Now, even eCommerce businesses can have economic nexus if they pass a sales or transactions threshold.
Monitoring your nexus is always important, especially if you sell in multiple states, but it’s especially important at the busiest times of the year. With Black Friday’s spike in sales, you may find that your business establishes nexus in one or more new states. Each state has different rules for when nexus is triggered, so keeping track of where your sales are happening can save you from costly penalties.
Economic Thresholds by State
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Filing Requirements
Once you’ve determined where you have sales tax nexus, you’ll need to make sure you're complying with each state's filing requirements. Black Friday's higher sales volume could mean you'll owe more in sales tax, and in some cases, it could change how frequently you need to file.
Some states require monthly filings, while others may only require quarterly or annual returns. Stay organized and ensure you’re meeting all the deadlines.
How to Prepare for Black Friday
Before the Black Friday rush, we recommend putting a plan in place. Start by reviewing your nexus obligations, checking for any tax rate changes, and ensuring your systems are up-to-date for calculating the correct tax rates.
Review your nexus obligations: Check the latest thresholds for economic nexus and monitor for any new states where Black Friday sales could push you over the line. It’s easiest to use nexus monitoring software. This tracks your sales and alerts you when you’re nearing or exceeding sales tax thresholds in new states.
Prepare for new registrations: Be ready to register for a sales tax permit in states where you reach nexus.
Update your sales tax rates: Ensure your tax rates are accurate and up-to-date for all the states and localities where your products are available. Double-check for any recent rate changes.
Automate your sales tax calculations: If you don’t already use one, implement a sales tax automation solution to streamline tax calculations and ensure accuracy.
Check your filing frequency: Review the sales tax filing deadlines for each state where you have nexus, especially if increased Black Friday sales could change your filing frequency.
Consider Hiring Professional Help: If your business is growing, or you’re not clear on your obligations, consider hiring a tax professional to help manage compliance during the busy season.
A Sales Tax Solution for Growing Businesses
If your business is growing or you find it challenging to keep up with sales tax compliance across multiple states, you might want to consider using an automation sales tax solution. Yonda Tax calculates the correct tax rates based on customer locations, monitors your nexus thresholds, and automates your filings.
Reliable sales tax software simplifies the entire compliance process, giving you more time to focus on running your business during the busiest shopping season of the year. To check your business is staying compliant with changing regulations, book a free consultation with our experts.
The information in this article is true to the best of our knowledge at the time of writing, but sales tax regulations can change very quickly. You should always consult a tax professional for legal advice.
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