How Halloween Spending Trends Create Sales Tax Compliance Challenges

What’s 12 feet tall, comes with 20 different LCD eye options, 30 customizable sound effects, and takes two adults an hour to assemble?

The answer – “Ultra Skelly” – will be familiar to anyone who has taken note of lawn decorations on their neighborhood strolls during the past few autumns. Sales of giant skeletons, which typically carry $250-$500 price tags, along with skeletal pets and inflatable ghosts, witches, and werewolves reflect a boom in Halloween spending that started stirring from the shadows amid the COVID-19 pandemic.

Halloween Spending Trends and Retail Tax Compliance

In 2020, total U.S. Halloween spending reached $8 billion. This year, it is expected to hit $13.5 billion, according to NRF’s annual Halloween consumer survey, conducted by Prosper Insights & Analytics.

Costumes ($4.5 billion) continue to represent the largest Halloween spending category, edging out decorations ($4.3 billion) and candy ($4.1 billion), according to NRF. U.S. consumers are projected to spend the rest of that $13.5 billion on spooky greeting cards.

Rising Halloween sales present retailers with a pillowcase of treats as well as some sales tax compliance tricks, such as:

• How extended Halloween shopping affects sales tax: “Summerween” is a thing. This year, 28% of Halloween consumers started shopping in July or August – up from 16% in 2025, according to PwC. The NRF research also indicates that 49% of Halloween shoppers started opening their wallets in September or earlier – up from 36% a decade ago. The longer Halloween selling period mirrors the lengthening holiday-shopping season. It also means that categories and individual items are likely to be subjected to more sales tax rate changes during the Halloween shopping season. A longer window between purchase and return can also complicate merchandise returns, since the rate, promotion, or bundle that applied at checkout may no longer apply when an item comes back. Promotional pricing changes, along with bundled discounts and coupons, create additional layers of complexity while contributing to Defensibility Drift.
• Product taxability – candy, food and healthier treats: More than half of consumers plan to buy healthier treats this year, according to PwC, and 25% expect to replace classic candy with healthier alternatives. The consulting firm views this shift as part of a broader cultural change: “Whether consumers are limiting candy intake, reducing alcohol consumption, or choosing safer makeup products, the findings point to many different pathways to a healthier Halloween.” This trend also has indirect tax compliance implications. State and local jurisdictions vary in how they define and differentiate candy and other food for tax purposes – a dynamic that extends beyond the U.S.
• Agentic commerce, Gen Z, and tax compliance challenges: Nearly half of consumers (47%) are using AI tools for Halloween shopping this year, according to NRF’s research. PwC finds that 19% of AI-fluent Gen Z shoppers use AI tools to automate and schedule their Halloween purchases rather than shopping manually. This autonomous commerce creates several tax compliance challenges, including determining who the buyer is, identifying the jurisdiction in which the transaction occurred, adhering to marketplace facilitator tax rules, and differentiating between physical and digital products.

Omnichannel Retail and Sales Tax Compliance

A final bit of tax-compliance trickiness bears mentioning: omnichannel transactions. Both the PwC and NRF surveys show that while most consumers visit brick-and-mortar locations to do their Halloween shopping, they use numerous other channels to buy and, in some cases, return items. As I’ve noted before, seasonal pop-up stores, Buy-Online-Pay-In-Store (BOPIS), and Buy-Online-Return-In-Store (BORIS) raise crucial questions about sourcing and tax determinations. Social commerce platforms such as TikTok Shop add another channel for retailers to navigate. Getting those answers wrong can subject retail tax groups to hair-raising sales tax audits.