How Does the ERTC Assist Independent Bookstores?

January 25, 2024
Dayes Law Firm

Independent bookstores serve as cornerstones of their communities, but quite a few struggle to compete with large national chains. When the COVID-19 pandemic struck, survival became even more difficult. Many bookstore owners were forced to lay off employees or shutter their doors for good.

The ERTC, or Employee Retention Tax Credit, is designed to help small business owners who suffered during the pandemic. Here’s what to know about the ERTC for bookstores.

ERTC Benefits for Book Retailers

The ERTC comes with many tax incentives for bookstore owners. If your business qualifies, you can claim up to $26,000 per employee, which goes a long way toward keeping the business afloat.

For small businesses (those with less than 500 employees), the ERTC credits are for wages paid to employees. That means if you kept paying employees even during a government shutdown, you might qualify for the credit.

The ERTC is also appealing because it’s a refundable payroll tax credit, not a loan, which means you don’t have to repay it. You can use the money for anything you want, such as:

  • Hiring new employees or providing bonuses to existing employees
  • Building an improved benefits program
  • Purchasing inventory for your bookstore
  • Buying new equipment, such as tables and chairs for a reading corner
  • Advertising
  • Bills and debts 

ERTC Eligibility for Bookstores

To claim the ERTC, you’ll need to meet at least one of these requirements:

  • Your business had a significant drop in gross receipts (at least 20% compared to the same calendar quarter of the prior year for 2021 and at least 50% for 2020).
  • Your bookstore had to close down fully or partially because of a government order limiting commerce, travel, or group meetings.

The first requirement is fairly self-explanatory, but many bookstore owners are confused about the government shutdown requirement. Here are a few examples of partial shutdowns that might qualify you for the credit:

  • Your book supplier had supply chain issues that negatively impacted your business.
  • Your city temporarily required non-essential businesses to close, limiting you to online operations.
  • You had to limit the number of customers allowed in your shop at one time.
  • You had to shut down your cafe or snack portion of your business.

Even if your bookstore doesn’t meet any of the above requirements, you might qualify if you opened your business on or after February 15, 2020. To qualify as a recovery startup business, you must have at least one W-2 employee (excluding family members and owner-operators). Your annual revenue for the past three tax years must also not have exceeded $1 million.

How to Claim the Employee Retention Tax Credit for Bookshops

Claiming the ERTC in the bookstore industry follows the same process as all other industries. If you qualify for the credit, complete Form 941-X: Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund and send it to the IRS for processing. You must submit the form by mail, as the IRS does not currently accept online submissions.

You should know that the IRS placed a temporary hold on processing claims for the remainder of 2023, which is likely to cause significant backlogs in 2024. As a result, your credit may not arrive for several months.

Don’t Miss Out on This Valuable Credit

You must act quickly if you’d like to claim the ERTC for bookstores. You have until April 15, 2024, to claim the credit for 2020 and one additional year to claim the credit for 2021. You’ll be unable to claim ERTC funds if you miss the deadline.Want to know more about IRS compliance for bookshops or determine whether you’re eligible for the ERTC? Call Dayes Law Firm at 800.503.2000 for a free consultation.