Avalara > Blog > Sales and Use Tax > Are you ready for a holiday season like no other? 10 tips for successful selling

Are you ready for a holiday season like no other? 10 tips for successful selling

  • Nov 10, 2020 | Gail Cole

gifts-presents

2020 has been a heck of a year, and more challenges lie ahead as COVID-19 cases rise and restrictions on in-person commerce reemerge. Yet ecommerce is thriving; online sales are projected to increase by more than 35% this holiday season, to nearly $190.5 billion in the United States alone. It appears that when the going gets tough, the tough shop.

Ecommerce is expected to account for approximately 30% of holiday sales worldwide*. In the U.S., roughly 71% of adults say they’ll do more than half of their holiday shopping digitally. That’s exciting news for ecommerce businesses, but it means you’ll have to be at the top of your game.

What can you do to help your ecommerce store succeed during the unprecedented holiday shopping season to come? Read on.

1. Get ready for a surge in sales and new sales tax obligations

Holiday shopping started early this year with Amazon’s annual Prime Day event. Typically held in July, it moved to mid-October in 2020 because of COVID-19 and served as the unofficial kickoff to the holiday season. Despite the economic hardships many Americans are experiencing because of the pandemic, Prime Day sales rose by 36% year over year.

Ecommerce businesses whose sales surge this holiday season may develop new tax obligations through state economic nexus laws, which require out-of-state sellers with a certain threshold of sales in the state to register to collect sales tax. Strong holiday sales in October, November, or December could cause you to cross one or more state economic nexus thresholds, leading to new tax obligations.

To minimize surprise and risk, assess your sales tax risk now.

2. Use marketplaces

Marketplace facilitators like Amazon, Etsy, and Walmart can help you expand into new markets: Globally, digital marketplaces generated $2.03 trillion sales in 2019, or 57% of online sales. If you’re not yet selling through a marketplace, now could be a good time to start.

Because numerous states require many online marketplaces to collect and remit sales tax on behalf of third-party sellers, selling through a marketplace can allow you to grow your sales without dramatically increasing your sales tax compliance burden. However, marketplace facilitator laws don’t necessarily free marketplace sellers from all tax obligations. Many states require third-party sellers to register and file returns even when the marketplace collects and remits the tax. Understanding each state’s requirements from the start can help minimize surprises and compliance risk.

3. Sell DTC

Manufacturers and wholesalers can increase sales this holiday season by selling directly to consumers (D2C). With D2C sales in 2020 expected to be 24% higher than in 2019, they could become a key source of revenue for businesses normally reliant on brick-and-mortar retailers.

Some state economic nexus laws count wholesales and resales toward the economic nexus threshold, so it’s possible for wholesalers and manufacturers to have reporting obligations even if they don’t make retail sales. Expanding into retail only increases the likelihood of triggering economic nexus, so again, it’s important to develop a good understanding of remote sales tax laws as soon as possible.

4. Keep an eye on economic nexus thresholds

Remote sellers are required to register and start collecting tax immediately after crossing the economic nexus threshold in some states — as in by the very next sale. It’s therefore essential to closely monitor sales in all economic nexus states.

Different states include different sales in the threshold. Some states include only direct sales, some include sales made through a registered marketplace. It’s imperative for sellers to understand state economic nexus requirements and closely monitor sales into states with economic nexus and marketplace facilitator laws.

It’s also worth noting that physical presence in a state triggers a sales tax obligation in all states with a sales tax. And physical presence isn’t limited to having a brick-and-mortar store; physical presence can result from inventory stored for sale in a state, the presence of contractors or employees, or deliveries made in company-owned vehicles.

5. Fortify your ecommerce site

Given the anticipated surge in online sales this holiday season, it’s paramount websites and webstores be able to handle high traffic volumes. A clunky website can lead to cart abandonment, as there are too many other well-running options available. Ecommerce acceleration solutions can increase page load times and optimize image delivery, ensuring a smooth experience for consumers.

Having a shopping cart that automatically calculates applicable taxes and shipping fees further streamlines the experience for consumers. Surprise costs at checkout can interfere with final purchases.

6. Streamline the omnichannel experience

It’s more important than ever to meet consumers where they are. Approximately 42% of ecommerce sales now occur through mobile devices, and click-and-pick sales options like buy online, pickup in store (BOPIS) and curbside delivery have increased exponentially since the start of the pandemic. Having an omnichannel strategy is a must.

In addition to providing a seamless experience for consumers who may switch from desktop to mobile, and delivery to pickup, retailers must be able to monitor inventory across all channels. You’ll also want a tax compliance solution that can compile sales data from all channels to facilitate sales tax remittance.

7. Go global

The U.S. is a big market, but it’s a drop in the bucket of the global marketplace: close to 85% of the world’s purchasing power exists outside of the U.S. Tapping into that market could unleash a world of new opportunities. Yet to do so, you need to be able to handle customs duty and import taxes like VAT and GST. If customers don’t see and pay these taxes at checkout, their packages could be held up at customs and ultimately rejected.

8. Get creative

With brick-and-mortar sales likely to lag this holiday season, more retailers will be focusing on ecommerce. Creative strategies can help you stand out in a crowded field. Offer sales at unexpected times, and market them through social media. Reward customers with deals that incentivize additional buys. And to minimize delays at checkout, offer flexible payment options like Apple Pay or PayPal.

9. Plan for shipping challenges

Understand different shipping options and how they’re taxed. When the pandemic first shuttered brick-and-mortar stores and caused an unexpected lift in online spend, supply chains worldwide were stressed. Physical shelves were devoid of high-demand goods and normally speedy shipments encountered unexpected delays. The same could happen again this holiday season.

The more flexible you can be with shipping, the faster you’ll be able to get goods into your customers’ hands. However, different shipping options can have different tax consequences. Furthermore, different states tax shipping and delivery differently. As your sales expand into new markets, be sure you know how to handle shipping and tax.

10. Have a system set up for returns

Returns happen every holiday season. With more people shopping online in 2020, including many consumers who would rather be physically pulling items off the shelf, product returns could increase. It’s therefore essential to have a system in place to process returns quickly and efficiently, and to refund any sales tax that needs to be refunded.

As you prepare for this unprecedented shopping season, it’s important to consider how ecommerce growth will impact sales tax compliance. Avalara’s 10 tips for successful selling in a holiday season like no other includes advice from industry experts and tips to help you boost sales, satisfy customers, and understand sales tax implications. Get the guide.

*All statistics come from the report.


Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Gail Cole
Avalara Author Gail Cole
Gail Cole is a Senior Writer at Avalara. She’s on a mission to uncover unusual tax facts and make complex laws and legislation more digestible for accounting and business professionals.