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3 Trends We Saw in 2019 in eCommerce
byNovember 1, 2020
As eCommerce evolves to fuse the brick and mortar store into an omni-channel online retail experience across multiple platforms, remote sellers and their teams have had no choice but to finally embrace economic nexus and its implications.
If 2018 was the year of dramatic change sales tax, 2019 was a combination of wait and see as well as feverish implementation by retailers to determine when and where they owed sales tax. While some held off until their state told them to register, others proactively remitted sales taxes where they reached nexus.
With this in mind, we began to notice a few trends pop up throughout last year in the eCommerce landscape as developers, accounting firms, and executives began to implement new sales tax solutions to calculate their sales tax reporting. Below we’ve outlined three of the biggest trends we witnessed around online spending and sales tax.
1. eCommerce is evolving into a bigger piece of the retail pie
Consumer trust in online shopping continues to skyrocket, as proven by the yet again record-breaking Black Friday and Cyber Monday data. Buyers are shopping from the convenience of their home, leisurely scrolling social media feeds, and with one click or voice command, their holiday shopping is complete.
According to Adobe, from November 1 to December 1, 2019, $72.1 billion in online sales were generated, at 16.3% growth YoY. Online sales on Black Friday and Cyber Monday showed similar growth, increasing 19.4% and 16.5%, respectively.
Growth and trust in online shopping is not slowing down, and in the U.S., it’s projected to grow 47.8% by 2023. As a result, eCommerce sellers are experimenting with new channels and technologies, such as augmented reality (AR) and artificial intelligence (AI).
These new technologies, as well as advancements in marketing tactics such as targeting and personalization, will continue to propel growth in online shopping and mobile purchasing in 2020 and beyond.
How are Shoppers Making Purchases?
Additionally, sales via smartphones achieved new records in 2019 and accounted for 33% of all Cyber Monday sales, a 46% growth YoY. Moreover, eMarketer is projecting mobile purchasing will represent 72.9% of eCommerce sales by the end of 2021.
So, it goes without saying that providing a convenient and flawless purchasing experience is paramount for eCommerce sellers, as up to 40% of annual sales are attributed to the holiday shopping season.
2. Developer needs for a sales tax solution are growing
With all of this growth in mind, eCommerce CEOs, CFOs, developers and accountants are putting their trust in solutions that can handle high traffic volume with minimal downtime. Technology that is reliable, accurate and secure is not only imperative but provides peace of mind during the busiest shopping seasons of the year.
TaxJar’s 20,000+ eCommerce customers are no different, as evidenced during the Black Friday/Cyber Monday five-day shopping period when TaxJar hosted 27-million API calls. In total, this represented 5X growth from 2018. Closing out 2019, TaxJar’s API calls represented a nearly 200% increase over the previous year, enabling as much as $2.3B in Gross Merchandise Volume (GMV) with popular eCommerce merchants.
Avoid latency at all cost
To deliver accurate and seamless online shopping experiences, regardless of the channel or technology, eCommerce sellers must partner with reliable and trustworthy providers who are at the forefront of their respective industry. Lack of transparency and downtime at the point of sale can cost sellers millions of dollars, not to mention a decline in brand loyalty. In fact, UPS’ 2019 Pulse of the Online Shopper study stated that 95% of consumers want all fees and taxes totaled before they click buy.
One company, Gremlin, uses online revenue metrics to track the financial impact of downtime for some of the top 25 eCommerce sellers in the U.S. For example, every minute of downtown that Amazon and Wal-Mart experience equals a loss of approximately $220,000 and $44,771 per minute, respectively.
3. People are filing in more states as sellers reach nexus in new places
When it comes to online sales tax, online sellers can’t afford mistakes or latency, as sales tax laws are extremely complex and vary from state to state. Knowing when and where you have, or are approaching nexus can be even trickier. And, thanks to the 2018 South Dakota v. Wayfair Supreme Court ruling, many online sellers have new sales tax responsibilities where they previously had none.
The landmark Supreme Court decision granted individual states the power to set their own transactional or sales revenue thresholds to trigger economic nexus. With 40+ different economic nexus laws across the country, remote sellers must keep up with their sales in each state to determine when they are required to collect and file sales tax. Sellers must also track which states have passed marketplace facilitator laws, which allow popular marketplaces to collect on the seller’s behalf.
Because remote sellers are now having to remit sales tax where they weren’t before, we’re seeing a considerable growth in the number of sellers filing in new states. For example, in 2019, TaxJar customers registered and filed sales tax returns in more than three times as many states as they did just a year ago, the most popular being FL, GA, CA, NC and TX. Get Ahead for 2020 with TaxJar
If the online sales tax landscape has proven anything, it’s that it is constantly changing. And as businesses grow, so does the complexity.
How TaxJar Can Help
Sales taxes are so complicated that trying to manage them manually wastes valuable time and energy better spent on running the business at hand. A trusted sales tax solution can help you know where and when you have a sales tax obligation, as well as file on time, every time.
To keep you compliant, TaxJar offers Economic Nexus Insights that alert you when you’re approaching nexus or lets you know when you’ve crossed the threshold and have a responsibility to collect and remit sales tax.
Managing sales taxes efficiently and cost-effectively requires partnering with a provider with a proven track record of speed, volume, accuracy and support. To help you understand more about sales tax collection, nexus legislation, due dates, and more, we’ve created a 2020 Sales Tax Survival Guide to walk eCommerce sellers through the process, with additional videos and resources here.
The basics of US sales tax
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