Why did Shopify's tax expenses spike in Q4 2024?

Shopify's tax expenses spiked in Q4 2024 due to several key factors: 1. **Revenue Growth**: Shopify experienced significant revenue growth, with a 26% year-over-year increase in Q3 2024. This growth, coupled with the high-volume holiday selling season in Q4, led to increased tax liabilities as the company's income and sales tax obligations rose in tandem with its expanding business activities. 2. **Holiday Season Impact**: The holiday season, particularly Black Friday and Cyber Monday, is a critical period for e-commerce. Shopify saw record-breaking sales during these events, with Gross Merchandise Volume (GMV) increasing by 22% year-over-year to $5 billion, and GMV on Black Friday/Cyber Monday rising by 24% year-over-year to $11.5 billion. The heightened sales volume and associated tax obligations contributed to the spike in tax expenses. 3. **International Expansion**: Shopify's international growth has been robust, with GMV outside North America growing by 33% in Q3, and particularly strong performance in Europe where GMV grew over 35%. As the company continues to expand its global footprint, it becomes subject to various tax regulations and requirements in different jurisdictions, which can lead to increased tax expenses. In summary, Shopify's tax expenses spiked in Q4 2024 due to the company's strong revenue growth, the impact of the holiday season on sales tax obligations, and its ongoing international expansion efforts. These factors combined to increase the company's tax liabilities and expenses during the quarter.