Wayfair Inc.W
Wayfair Inc. Income Taxes Disclosure
11. Income Taxes
The components of the provision for income taxes, net for the years ended December 31, 2025, 2024 and 2023 are presented below:
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| (in millions) | ||||||||||||||||||||
| Current: | ||||||||||||||||||||
| Federal | $ | — | $ | — | $ | — | ||||||||||||||
| State | 6 | 4 | 3 | |||||||||||||||||
| Foreign | 5 | 2 | 6 | |||||||||||||||||
| Deferred: | ||||||||||||||||||||
| Federal | (1) | — | — | |||||||||||||||||
| State | — | — | — | |||||||||||||||||
| Foreign | (1) | 4 | — | |||||||||||||||||
| Provision for income taxes, net | $ | 9 | $ | 10 | $ | 9 | ||||||||||||||
As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the actual provision for income taxes, net differs from the expected provision for income taxes computed at the U.S. Federal statutory tax rate of 21% due to the following:
| Year Ended December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (in millions) | ||||||||||||||
| Provision for income taxes at the federal statutory rate | $ | (101) | $ | (153) | ||||||||||
| State income tax expense, net of federal impact | 4 | 3 | ||||||||||||
| Foreign tax rate differential | 13 | 17 | ||||||||||||
| Intercompany debt adjustment | (242) | — | ||||||||||||
| Uncertain tax positions, net | 191 | — | ||||||||||||
| Non-deductible equity-based compensation expense | 4 | 10 | ||||||||||||
| Shortfall expense from equity-based compensation | 15 | 17 | ||||||||||||
| Change in valuation allowance | 105 | 103 | ||||||||||||
| Limitation on officer's compensation | 3 | 5 | ||||||||||||
| Intangible property basis step-up | (7) | — | ||||||||||||
Intercompany interest | 15 | 15 | ||||||||||||
| Other | 10 | (8) | ||||||||||||
| Provision for income taxes, net | $ | 10 | $ | 9 | ||||||||||
As further described in Note 1, Summary of Significant Accounting Policies, the company has adopted ASU 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures, on January 1, 2025 prospectively. The following table is a reconciliation of the U.S. federal statutory rate of 21% to Company’s effective rate of the year ended December 31, 2025 in accordance with the guidance in ASU 2023-09:
| Year Ended December 31, | ||||||||||||||
| 2025 | ||||||||||||||
| (in millions, except percentages) | ||||||||||||||
| Loss before income taxes | $ | (304) | ||||||||||||
| Federal statutory tax rate | (64) | 21.0 | % | |||||||||||
State and local income taxes, net of federal(national) income tax effect(a) | 5 | (1.7) | % | |||||||||||
| Foreign tax effects | ||||||||||||||
| Canada | ||||||||||||||
| Valuation allowance | 8 | (2.6) | % | |||||||||||
| Other | (2) | 0.7 | % | |||||||||||
| Total other foreign | (4) | 1.3 | % | |||||||||||
| Changes in valuation allowances | 54 | (17.8) | % | |||||||||||
| Nontaxable or nondeductible items | ||||||||||||||
Loss on debt extinguishment | 45 | (14.8) | % | |||||||||||
Limitation on officer’s compensation | 5 | (1.6) | % | |||||||||||
| Other | 3 | (1.0) | % | |||||||||||
| Other adjustments | ||||||||||||||
Shortfall expense from equity-based compensation | 10 | (3.3) | % | |||||||||||
| Interest expense | (49) | 16.1 | % | |||||||||||
Other | (2) | 0.7 | % | |||||||||||
| Provision for income taxes, net | 9 | (3.0) | % | |||||||||||
(a)State taxes in California and Texas made up the majority of the tax effect in this category
The components of loss before income taxes determined by tax jurisdiction, are as follows:
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| (in millions) | ||||||||||||||||||||
| U.S. | $ | (313) | $ | (245) | $ | (495) | ||||||||||||||
| Foreign | 9 | (237) | (234) | |||||||||||||||||
| Total | $ | (304) | $ | (482) | $ | (729) | ||||||||||||||
During the year ended December 31, 2025, the Company paid $4 million in state income taxes, net of refunds received, and $8 million in foreign tax payments. The payments per state and foreign jurisdiction were immaterial for the year ended December 31, 2025.
The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities for the periods presented are as follows:
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| (in millions) | ||||||||||||||
| Deferred tax assets: | ||||||||||||||
| Net operating loss carryforwards | $ | 911 | $ | 809 | ||||||||||
| Equity-based compensation expense | 7 | 7 | ||||||||||||
| Intangible property | 61 | 60 | ||||||||||||
| Accrued expenses and reserves | 25 | 21 | ||||||||||||
| Capitalized technology | 45 | 96 | ||||||||||||
| Leases | 261 | 283 | ||||||||||||
| Interest expense | 86 | — | ||||||||||||
| Other | 43 | 55 | ||||||||||||
| Gross deferred tax assets | 1,439 | 1,331 | ||||||||||||
| Less: Valuation allowance | (1,176) | (1,042) | ||||||||||||
| Net deferred tax assets | 263 | 289 | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Prepaid expenses | $ | (12) | $ | (13) | ||||||||||
| Property and equipment | (27) | (42) | ||||||||||||
| Operating lease right-of-use asset | (215) | (234) | ||||||||||||
| Other | (12) | (5) | ||||||||||||
| Total deferred tax liabilities | (266) | (294) | ||||||||||||
| Non-current net deferred tax liabilities | $ | (3) | $ | (5) | ||||||||||
The valuation allowance increased by $134 million during 2025. The increase in the valuation allowance is the result of Wayfair establishing a valuation allowance related to the net increase of $102 million in losses and $86 million in interest expense, partially offset by a $51 million reduction of capitalized technology and $3 million of various other assets amounting during the current year.
In determining the need for a valuation allowance, Wayfair has given consideration to the cumulative book income and loss positions of each of its entities as well as its worldwide cumulative income position. Wayfair has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which are primarily compromised of net operating losses, on a jurisdictional basis. At December 31, 2025, Wayfair has determined that it is more likely than not that Wayfair will not realize the benefits of its deferred tax assets, and as a result, has maintained a full valuation allowance against substantially all of the worldwide net deferred tax assets.
As of December 31, 2025, Wayfair had tax effected federal net operating loss carryforwards of $437 million available to offset future federal tax liabilities. In addition, Wayfair had tax-effected state net operating loss carryforwards of $181 million available to offset future state tax liabilities. Of the tax-effected federal net operating loss carryforwards, $42 million begin to expire in the year ending December 31, 2037, and $395 million do not expire. The tax-effected state net operating loss carryforwards begin to expire in the year ending December 31, 2025. The ability to utilize these federal and state tax attributes may be limited in the future if Wayfair experiences an ownership change pursuant to Internal Revenue Code Section 382. An ownership change occurs when the ownership percentages of 5% or greater stockholders change by more than 50% over a three-year period. Through December 31, 2025, Wayfair is not aware of any ownership changes that would result in a material limitation on its ability to utilize these tax attributes.
As of December 31, 2025, Wayfair also had tax effected foreign net operating loss carryforwards of $293 million available to offset future foreign tax liabilities. Of these, $39 million will begin to expire in the year ending December 31, 2038, and $254 million do not expire.
As of December 31, 2025, Wayfair has not provided for deferred income taxes on the outside bases differences in its foreign subsidiaries since they are indefinitely reinvested, or it is within the control of Wayfair to recognize these basis differences on a tax-free basis. Upon realization of the outside bases differences in the form of dividends or otherwise, Wayfair could be subject to income taxes as well as withholding taxes. The amount of taxes attributable to the outside basis differences, if realized, is expected to be immaterial.
Wayfair establishes reserves for uncertain tax positions based on management's assessment of exposures associated with tax deductions, permanent tax differences and tax credits. A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits (excluding interest and penalties) is as follows:
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| (in millions) | ||||||||||||||||||||
| Beginning balance | $ | 306 | $ | — | $ | — | ||||||||||||||
| Increases as a result of tax positions taken in the current period | — | 306 | — | |||||||||||||||||
| Ending balance | $ | 306 | $ | 306 | $ | — | ||||||||||||||
As of December 31, 2025, $1 million of the $306 million of unrecognized tax benefits would affect our effective tax rate, if recognized, and the remaining $305 million would affect our deferred tax accounts and our valuation allowance. Wayfair's policy is to recognize interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes, net. Related to the unrecognized tax benefits noted above, Wayfair did not accrue any penalties and interest during 2025, 2024 or 2023 because it is believed that such additional interest and penalties would be insignificant.
Wayfair's tax jurisdictions include the U.S., the United Kingdom, Ireland, India, and Canada. The statute of limitations with respect to U.S. federal income taxes has expired for years prior to 2022. The relevant U.S. state statutes vary and years prior to 2018 are generally closed. The statute of limitations for foreign income taxes vary, but have expired for years prior to 2018. However, preceding years remain open to examination by U.S. federal and state and foreign taxing authorities to the extent of future utilization of net operating losses generated in each preceding year.
The Organization for Economic Co-operation and Development (“OECD”) has proposed a global minimum tax of 15% of reported profits (“Pillar 2”) that has been agreed upon in principle by over 140 countries. Through 2025, many countries have incorporated Pillar 2 model rule concepts into their domestic laws. Although the model rules provide a framework for applying the minimum tax, countries may enact Pillar 2 slightly differently than the model rules and on different timelines and may adjust domestic tax incentives in response to Pillar 2. Wayfair has estimated the impact of Pillar 2 on our 2024 tax expense to be immaterial. Our deferred tax assets and liabilities are calculated based on the statutory tax rates in the various jurisdictions in which we operate. Our deferred tax assets and liabilities do not reflect the potential impact of Pillar 2 top-up taxes or any other minimum tax regimes for future periods, as such taxes are treated as period costs in accordance with US GAAP. Wayfair is still evaluating the potential consequences of Pillar 2 on longer-term financial positions.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Feb 25, 2019 | |
| 2017 | Feb 26, 2018 | |
| 2016 | Feb 28, 2017 | |
| 2015 | Feb 29, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.