Happy holidays for growing businesses: How to stay sales tax compliant during the year-end rush

With the holiday season well underway, for many growing  retailers, it’s the most hectic time of the year — and the most crucial for financial growth. However, as orders pour in, sales tax compliance can get more complicated, consuming valuable time and resources right when you have the least to  give. And letting compliance tasks slide isn’t an option unless you want to face potential fines and pen penalties. Here’s how to navigate sales tax compliance while making the most of the holiday rush. 

1. Sales tax compliance can get more complicated during the holiday rush. More sales and more jurisdictions mean higher risk of mistakes.
2. Understanding your sales tax obligations is essential. Nexus can be triggered in several ways, and once it’s established, you must register, collect, file, and remit tax.
3. Automation is the most effective way for growing businesses to stay compliant. Sales tax software helps track nexus thresholds, calculate accurate rates, manage exemption certificates, and handle filing across multiple jurisdictions.

Whenever you make a sale, sales tax is most likely a part of the transaction, so it’s important to know some basics. Sales tax is local in nature, with many different jurisdictions levying tax on sales within their borders. Most states have sales tax, with a few exceptions. In addition, other jurisdictions, such as counties and cities, may also tax sales. Each jurisdiction has its unique regulations and requirements.

Sales tax from more than one jurisdiction can apply to a single sale. In Seattle, Washington, for example, state sales tax of  6.5% and city sales tax of 3.85% apply to taxable sales within the city in December 2025. These are combined into a single rate — 10.35% in this case — that must be added to the purchase price if the seller has a sales tax obligation. While the tax is paid by the purchaser, the seller is required to add the tax to the sale, collect it, and remit it to tax authorities.

You have an obligation to charge sales tax on customer purchases once you’ve established nexus in a jurisdiction. Nexus is a connection to the jurisdiction. Once you’ve established nexus, you’re required to register with tax authorities, collect taxes from customers, file sales tax returns, and remit taxes. Establishing nexus means you must follow the sales tax rules for the jurisdiction or face fines or other penalties.

There are a few ways for a business to establish a sales tax obligation: physical presence in a state (physical nexus), economic activity in a state (economic nexus), referrals originating in a state (click-through nexus), or ties to in-state affiliates (affiliate nexus).

Sales tax compliance isn’t simple, and the more business you do in multiple locations, the more complex it gets. While growth during the holiday season is great, brisk sales can create challenges on the sales tax compliance front.

Filing in multiple jurisdictions

Unless all your sales are in a single jurisidiction, you’ll likely have to register, collect sales tax, and file returns in multiple jurisdictions. Selling online? The number of jurisdictions can multiply fast as sales rack up over the holidays. In addition, it can be difficult to know when you’re close to crossing the nexus threshold for sales within a certain jurisdiction. It’s all too easy to establish nexus without even realizing it, increasing your risk of noncompliance issues, including audits and penalties.

Marketplace sales

Selling through online marketplaces can create unique sales tax challenges. While many marketplaces collect and remit tax on behalf of their sellers in certain states, they don’t necessarily handle every jurisdiction or every type of  transaction, which can leave retailers with unexpected filing and registration obligations. As businesses expand across multiple platforms, sales tax compliance grows in complexity.

Staying up to date on the rules

Sales tax regulations — including rates and filing deadlines — can and do change, so it’s critical to keep up with the latest requirements. When the number of jurisdictions you’re dealing with is growing quickly, it can be nearly impossible to manually stay on top of every single rate and rule for every jurisdiction where you have nexus.

Managing tax exemptions

Sales tax in any given jurisdiction doesn’t always apply to every item sold. Some purchases are exempt from sales tax — although sellers aren’t necessarily exempt from compliance. In jurisdictions where you have nexus, you need  to validate exempt sales of taxable goods and services via exemption certificates. You should also be aware of whether your exempt sales contribute to a state’s threshold for economic nexus.

In times of high demand, you want to spend your time and energy maximizing your sales, not worrying about sales tax compliance. So, it’s important to come up with a strategy to take care of compliance accurately and efficiently. Making a plan now can prevent headaches later.

Centralize your sales and tax data, review product taxability regularly, and monitor nexus thresholds proactively to help prevent issues before they become costly problems. Strengthen compliance by standardizing internal workflows, train staff on basic tax concepts, create a filing and renewal calendar to avoid missed deadlines, and define a clear process for collecting and validating exemption certificates. And whether you sell through your own site or marketplaces, reviewing where platforms collect tax on your behalf helps you understand where you remain responsible. 

Opt for automation

For growing retail and ecommerce businesses, manual sales tax compliance simply isn’t an option. It takes up valuable company time, requires specialized expertise, and increases your risk of errors — and unpleasant encounters with tax authorities that may follow. Automation is the answer. Sales tax software can automate every facet of sales tax compliance, including calculating rates, determining nexus obligations, registration, filing, reporting, and more, thereby saving time and resources for your business while keeping compliance on track. Automation offers growing businesses the confidence that every transaction is highly accurate and compliant, even during their busiest seasons.

Holiday sales can make or break growing businesses. Your company needs all hands on deck to optimize year-end opportunities, so you don’t want to get bogged down in sales tax compliance complications.

Avalara sales tax software can help you calculate the right rates, alert you to new nexus obligations, track filing and collection requirements, and aggregate data across multiple channels and systems. Give your business the gift of automation and let Avalara lighten your compliance load.

What is nexus and how do I know if I have it?

Nexus is a legal connection to a jurisdiction that creates a tax obligation. You can establish nexus through:

• Physical presence (stores, warehouses, or employees)

• Economic activity (meeting a state’s sales or transaction thresholds)

• Relationships (affiliates or click-through referrals) 
   

How do I keep track of rate changes across state and local jurisdictions?

Rates and rules can change frequently and vary widely across state and local tax jurisdictions. Manually tracking them is difficult, especially during high-volume periods. Automated sales tax software updates rates in real time to help ensure accuracy.

How can automation help my business stay compliant?

Automation can manage rate calculations, monitor economic nexus thresholds, validate exemption certificates, and file returns automatically. This reduces manual workload, improves accuracy, and lowers your compliance risk.