European VAT and US sales tax rules - black Friday and Cyber Monday sales in 2020

November 20, 2020

Black Friday and Cyber Monday sales are very popular for e-commerce retailers. Black Friday and Cyber Monday for merchants means only one – SALES, big ones. The amount Americans plan to spend in 2020 during these sales has been estimated to $285 million. There is one common point that online sellers usually ignore: if your sales are hitting the biggest numbers you will need to pay attention to local tax regulations to ensure that your business continues to meet VAT/Sales tax requirements in all relevant jurisdictions.

November 27th – Black Friday – Thanksgiving tradition exported from the USA to the rest of the world, where streets and online retailers announce their biggest discounts. This is an incredibly popular time to buy a variety of goods, from technology to cosmetics, and even begin to buy gifts for Christmas.

November 30th – Cyber Monday is the largest online shopping day in the U.S. and worldwide as its origins have encouraged small e-commerce networks to compete with big brands.

This year’s Black Friday and Cyber Monday will present promotions to a much wider audience, as practically all businesses going digital and more activity is going on online than ever before due to the pandemic – shopping and communicating online is the new normal. As more and more people shop online, many e-commerce retailers are increasing sales in existing markets or even reaching entirely new markets.

As mentioned before sales mean VAT/Sales tax, generally – compliance. The jump in Black Friday sales is great for business, but it can have serious and complex tax consequences. The larger are the sales to the US from EU sellers – the larger is the risk of exceeding remote sales tax threshold limits. It is worth remembering that the latter became a hot tax zone in June 2018 – South Dakota Wayfair, Inc. (Wayfair) – following a Supreme Court ruling, which allowed most countries to tax the EU and other foreign sellers for the first time.

If you already have a strong international customer community that’s great, however, have you ever wondered about the sales thresholds and that local tax authorities in certain countries expect you to register and account for that VAT/Sales tax? If your annual sales have been close, however below the threshold in each of the markets where you sell your products, the Black Friday jump and overall increased demand for online shopping may exceed the threshold. It is extremely important that in each market where you exceed the sales threshold, you must stay compliant.

The rules on distance selling and VAT compliance in EU countries are simple enough. If you export goods from your local jurisdiction to other EU countries, you will need to register in each of those countries if you exceed their country-specific sales threshold limit. If you exceed this limit in more than one country, you must register for VAT in each of them separately. This can be a quite complex and time-consuming process that varies from one country to another. Fortunately, the latest automated solutions make it very easy to comply, especially when you can seek help from experts.