Is it just your imagination or is e-commerce expanding every year?

It’s not your imagination. Let’s see some numbers:

  • 5% of global internet users have purchased products online.

  • The e-commerce industry is growing 23% year-over-year (yet 46% of American small businesses still don’t have a website).

  • By 2040, an estimated 95% of all purchases will be through e-commerce.

And here are some more numbers:

  • E-retail totaled over $4.2 trillion in 2020.

  • Cross-border e-commerce sales worldwide grew more than 20% in 2020. U.S. e-commerce grew more than 40% in 2020.

  • Amazon’s net profit grew more than 80% in 2020.

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According to the National Retail Federation, non-store and online sales are expected to grow 18% to 23% this year over 2020. And MasterCard adds that e-commerce made up roughly $1 out of every $5 spent on retail in 2020, up from about $1 out of every $7 spent in 2019.

The credit card giant further reports that roughly 20-30% of the COVID-related, global shift online is here to stay.

Who’s buying, and where?

Surveys say that more than half of consumers use smartphones for shopping, more than half prefer to shop online rather than in stores and almost three-quarters (74%) rely on their social networks to make purchasing decisions. Online stores with a social media presence have an average of 32% more sales than those that don’t.

A recent survey from Shippo/ShipBob found the average e-commerce order value was $78.09, the average shipping cost was $9.43. Year-over-year average package deliveries spiked in early 2020, rising 147% in the spring and 130% in the summer of 2020. The winter of 2020-21 saw continued growth in package deliveries, up 96% compared to winter 2019-20.

Ecommerce and Economic Nexus

One group especially excited about e-commerce growth - state and local governments. Why? Economic nexus. Many states survived the pandemic by the skin of their teeth due in part to the sales tax provided from e-commerce sales and the sales tax filed from companies that have reached nexus thresholds in their state.

The Wayfair decision in 2018 gave states the authority to establish economic nexus standards for companies doing business outside of their state. As of today, all states that have a state-wide sales tax have now jumped on the opportunity (even though Missouri will not go into effect until 2023) to establish revenue thresholds (as well as transaction thresholds in many states). If these thresholds are met, the business has a sales tax obligation to register, collect and remit sales tax. Why has e-commerce created a boom in economic nexus? Because customers from all over the country (and world) can easily access and purchase your products and services in ways they may not have been able to before. As your customers in new states grow, so does your potential sales tax obligation.

If you’re looking for help in navigating sales tax and understanding where you have an obligation, contact TaxConnex. We act as your outsourced sales tax department, completely removing the burden of sales tax from you and your business.  

Robert Dumas

Written by Robert Dumas

Accountant, consultant and entrepreneur, Robert Dumas began his public accounting career on the tax staff at Arthur Young & Co., followed by a brief stint at Grant Thornton. In 1998, Robert founded Tax Partners, which became the largest sales tax compliance service bureau in the country, and later sold it to Thomson Corporation. Robert founded TaxConnex in 2011 on the principle that the sales tax industry needed more than automation to truly help clients, thus building within TaxConnex a proprietary platform and network of sales tax experts to truly take sales tax off client’s plates.