Get Ready for Returnuary!

Why returns are a tax problem, not just a logistics one

The holiday shopping season doesn't end when the gifts are unwrapped. Retailers know what comes next: Returnuary. With eCommerce generating two to three times the returns of in-store purchases, the volume of post-holiday returns is growing. So is the tax complexity that comes with it.

In 2022, returns cost retailers roughly $816 billion in lost sales. But the financial impact goes beyond lost revenue. Every return triggers a tax obligation, and getting it wrong can lead to audit penalties, reporting errors, and unhappy customers.

8 ways returns make tax harder

This eBook breaks down eight specific ways returns increase tax complexity for retailers and marketplace sellers:

1. Refunding the right amount of tax means knowing the exact rate at the time of the original purchase, not today's rate. If you don't maintain historical tax rate data by jurisdiction, that calculation becomes a guessing game.
2. Different states tax different products differently. What's taxable in one state may be exempt in another, and cross-border eCommerce means you need to track it all.
3. Buy online, return in-store (BORIS) creates gaps in visibility. Without connected systems, it's hard to know where to report and remit sales tax accurately.
4. Multiple return channels (mail, in-store, marketplace) each carry their own tax obligations. Add Amazon, eBay, and delivery services into the mix, and tracking becomes a real challenge.
5. Disconnected point-of-sale, ERP, and eCommerce systems don't always share data. That increases the risk of errors and audit exposure.
6. The South Dakota v. Wayfair ruling expanded economic nexus to nearly every state. Keeping up with regulations across thousands of jurisdictions is not a manual task.
7. Some states require amended returns to reclaim remitted tax. Others allow credits. The lack of uniformity makes accounting complicated, and some retailers end up absorbing costs they shouldn't.
8. Sales tax makes up as much as 42% of total tax revenue in some states. That gives auditors strong motivation to look closely at retailers' records, especially smaller businesses with less compliance infrastructure.

How automation helps retailers thrive

Manual tax processes worked in a simpler world. They don't scale with today's omnichannel retail environment. An integrated, automated indirect tax engine can handle the volume and complexity that ERP, POS, and eCommerce systems alone cannot.

With the right tax automation in place, you can calculate taxes accurately across all sales channels, reduce audit risk, and spend less time on compliance. That means more time growing your business.