How to Guide for Small Business Owners to Navigate 4th Quarter Sales and Taxes

As we enter the 4th quarter, we know that small business owners are prepping for the busiest time of the year. Year-end sales spikes and financial planning for next year make the 4th quarter vital for your business. This time of the year, with an eye for a holiday sales surge, can make or break your annual performance. At Cowdery Tax, we know the unique challenges small businesses face during this season; from maintaining just the right amount of stock to managing your sales tax and payroll filings, we’re offering this guide to help you keep your financial records in top shape as you close out your annual financial records.

Why 4th Quarter is Important for Small Businesses

For most small businesses, the sales made in the 4th quarter provide for a significant portion of their annual revenue. The fourth quarter covers the months of October through December. Whether service, retail, or web-based services, this surge in sales comes from the holiday shopping season that encompasses Halloween, Thanksgiving, Black Friday, Small Business Saturday, Cyber Monday, and the Christmas season, leading through the end of the year as we plan for the New Year to kick off.

According to Deloitte’s 2025 Holiday Retail Forecast released earlier this month, U.S. holiday retail sales (covering November to January) are expected to grow by 2.9% to 3.4% year-over-year compared to the 2024 holiday season, totaling approximately $1.61 trillion to $1.62 trillion. With an increase in sales comes an increase in financial responsibility.

While boosting revenue is always the goal of any business, staying organized with financial records is also vital. Tax season starts in late January, leaving little time to get your records in order. Having proper bookkeeping and tax planning during this sales period can help to keep stress at bay and even lower your tax liability.

How to Stay On Top of Your Finances for Quarter 4

1. Track Your Sales Accurately

The first step to successfully navigating 4th quarter is ensuring your sales tracking is airtight. Whether you’re selling products in-store, online, or through a mix of channels, accurate records are essential for both business insights and tax compliance.

Here’s what to focus on:

• Use Reliable Accounting Software: Tools like QuickBooks, Xero, or Wave can help you track sales in real-time, categorize transactions, and generate reports.
• Ensure your software is set up to handle sales tax calculations if your business operates in states with sales tax requirements.
• Make sure your software is up-to-date with updates now before the busy times hit.

Monitor Cash Flow:

Holiday sales can strain your cash flow, especially if you’re stocking up on inventory or hiring seasonal staff. Keep a close eye on your cash inflows and outflows to avoid surprises.

Reconcile Accounts Regularly:

Don’t wait until December 31 to reconcile your bank accounts, credit cards, and payment platforms like PayPal or Stripe. Weekly or bi-weekly reconciliations can catch errors early and keep your books clean.

Pro Tip:

If you’re offering discounts or promotions, track these separately to understand their impact on your profit margins. This data can help you plan more effectively for next year’s 4th quarter.

2. Understand Your Sales Tax Obligations.

Sales tax can be a complex area for small businesses, especially if you sell across state lines or online. The 2018 South Dakota v. Wayfair decision was a game-changer for sales tax compliance, overturning the previous physical presence rule and allowing states to impose sales tax collection requirements on out-of-state sellers based on economic activity alone. A nexus law requires a small business to collect sales tax on products, whether physical or digital, sold to consumers in their home state or another state if the business exceeds specific sales or transaction thresholds in that state, even if the products are ordered and delivered across the U.S. This change in law paved the way for states to implement nexus laws, 45 states (plus D.C.) now have such laws, making it essential for small businesses, especially those in e-commerce or multi-state sales, to monitor their activity closely.

For our West Virginia and Ohio clients, Q4 sales spikes mean you must watch your sales tax obligations closely due to economic nexus laws. In both states, you must collect and remit sales tax if your business exceeds $100,000 in sales or 200 transactions in a year. West Virginia has a 6% state tax rate (plus up to 1% local), and Ohio’s is 5.75% (plus 1.5-2% local). Register and file taxes for sales in these states, unless a marketplace like Amazon handles it for you. Use accounting software to track sales and avoid penalties. Our team can help with calculations, filings, and keeping your business compliant.

These thresholds are relatively low, meaning even modest 4th quarter growth could push your business over the line—potentially requiring registration mid-season. For example, a small WV retailer sourcing from Ohio suppliers might inadvertently create nexus in the other state through cross-border deliveries.

We recommend quarterly nexus checks using tools like automated accounting software to flag approaching thresholds early. Mistakes in sales tax compliance can lead to penalties, audits, and back taxes that erode holiday profits, so consider working with a professional to ensure accuracy.

Our team can help you automate sales tax calculations, determine your nexus status in WV and OH, and handle filings to save you time and reduce errors.

Here’s what you need to know for Quarter 4:

• Identify Your Nexus:

Determine which states you have a sales tax nexus in, based on sales volume, number of transactions, or physical presence (e.g., a store or warehouse). If you’re unsure, consult with us to review your obligations.

• Collect and Remit Sales Tax:

Ensure your point-of-sale or e-commerce platform is configured to collect the correct sales tax rates for each jurisdiction. Set aside these funds in a separate account to avoid dipping into them for operational expenses.

• File Returns on Time:

4th quarter sales tax filings are typically due in January. Check the filing deadlines for each state where you have nexus and mark them on your calendar.

Mistakes in sales tax compliance can lead to penalties, so consider working with a professional to ensure accuracy. Our team can help you automate sales tax calculations and filings to save you time and reduce errors.

3. Prepare for Year-End Tax Planning

Q4 is the perfect time to get a head start on tax season. By taking proactive steps now, you can minimize your tax liability and avoid scrambling in the new year. Here are some strategies to consider:

Review Your Income and Expenses:

Run a profit and loss statement to see where you stand. If you’re projecting a high taxable income, consider deferring some income to 2026 (e.g., by delaying invoices) or accelerating deductible expenses into 2025 (e.g., purchasing equipment or paying for subscriptions).

Maximize Deductions:

Common deductions for small businesses include advertising costs, office supplies, travel expenses, and employee wages. If you’re hiring seasonal workers, ensure you’re tracking payroll taxes correctly.

Contribute to Retirement Plans:

Contributions to a SEP-IRA or Solo 401(k) can reduce your taxable income while helping you save for the future. The deadline for 2025 contributions is typically your tax filing deadline (April 15, 2026, or later with an extension).

Estimate Your Taxes:

Work with your bookkeeper to estimate your Q4 tax payments. If you’re self-employed or operate as a pass-through entity (e.g., LLC, S-Corp), you may need to make quarterly estimated tax payments by January 15, 2026.

4. Organize Your Records for a Smooth Tax Season

Clean, organized books are the foundation of a stress-free tax season. Here’s how to get your records in order before the year ends:

Gather Documentation:

Collect receipts, invoices, and bank statements for all business transactions. Digital tools like Expensify or Shoeboxed can help you store and categorize these documents.

Review Your Chart of Accounts:

Ensure all transactions are categorized correctly (e.g., separating personal and business expenses). This is especially important if you’ve mixed personal and business funds during the busy holiday season.

Back Up Your Data:

Store your financial records securely in the cloud or an external drive to protect against data loss.

5. Partner with Professionals

Q4 is a hectic time, and managing sales, taxes, and bookkeeping on your own can be overwhelming. Partnering with a trusted tax and bookkeeping company like ours can free up your time to focus on growing your business.

We offer services like:

• Bookkeeping
• Sales tax filing
• Financial profit and loss reporting
• Payroll
• Personal Tax Filing

By working with us, you’ll have peace of mind knowing your finances are in order and your tax obligations are met.

The fourth quarter is a make-or-break period for small businesses, but with the right strategies, you can maximize your sales and minimize your tax stress. By tracking your sales accurately, understanding your sales tax obligations, planning for year-end taxes, and keeping your records organized, you’ll set yourself up for a successful 4th quater and a smooth start to 2026.

At Cowdery Tax, we’re here to support you every step of the way. Contact us today to schedule a consultation and let us handle the numbers so you can focus on what you do best—running your business.

This information is not intended as legal or tax advice. Cowdery Tax and its representatives does not offer legal or tax advice. We offer services for business bookkeeping, payroll, tax payments, and personal tax filings. We share information that is publicly available. Tax laws may change with or without notice that may alter or change the information contained in this publication.