Black Friday & Cyber Monday tip sellers into EU VAT and US sales tax liabilities

International tax authorities have their eyes on the holiday shopping calendar as an opportunity to extend their tax net on e-commerce beckons.

Biggest shopping days of the year in EU and US

Retailers will generate more sales in quarter 4 2019 than during the preceding 3 quarters combined. Peak festive shopping days in the EU and US will tip thousands of online merchants over annual VAT and sales tax selling thresholds in new territories. This will oblige them to register and collect local taxes for the first time. 

Sales will spike in both regions at the start of the December, pushing EU sellers over the EU VAT Distance Selling country thresholds. Similarly, EU sellers into the US run the risk of going over remote seller sales tax thresholds . The latter has become the hot tax zone following the 2018 Wayfair Supreme Court ruling, which has enabled almost 45 states to tax EU and other foreign sellers for the first time. 

The key dates are:

• 29th November – Black Friday, a Thanksgiving tradition exported from the US where high street and online retailers push their biggest discounts.  It’s a hugely popular time to shop for tech – from smartphones to laptops. 
• 2^nd December – Cyber Monday is the biggest online shopping day in the US, with online sales estimated at $8billion for 2018. It’s now well embedded in Europe, too. Its origins were around encouraging small e-retailers competing with the large brands

 VAT and Sales Tax thresholds trap distracted sellers

This manic selling period often distracts sellers from being aware or tracking their tax thresholds, and the tax authorities are all too aware of this.

EU country and US state annual thresholds require sellers to register and report local tax. You can check the EU thresholds here and US state thresholds here.

Tax authorities stepping-up threshold detection

The tax authorities in the EU and US have been investing heavily on staff and analytic software to spot sellers who have passed these thresholds. A number – including Germany, France, Italy and Austria – are requiring marketplaces to report sellers’ transactions in detail. In the US, similar marketplace responsibilities have been rolled out. Many new marketplace obligations include the power for tax authorities to force platforms to block offending sellers.

This means it is more important than ever that sellers identify if they are over any tax threshold. If you want to talk to our EU VAT or US sales tax specialist, contact us for free guidance.