Sales tax is an omnipresent concern for businesses of all types, even those that regularly use ERP and CRM solutions. Companies that have moved from operating in a single area to several cities, states or regions know how complex taxes can become, even when operating in just a handful of different jurisdictions. The high level of involvement needed to effectively manage this need exists despite the generally familiar, if not similar, structure of tax laws across municipalities, counties, states and at the federal level. Global growth, then, can be even more complicated, as countries and economic blocs have a variety of different approaches to sales and import taxes, tariffs and related financial concerns.
A growing global market
While taxes and tariffs are just as complex as they’ve always been, if not more so, it’s never been easier for business-to-business and business-to-consumer transactions to take place across wide geographical distances. Transactions through eCommerce channels allow small and midsize businesses to more easily compete with large ones, and for those big organizations to continue their growth.
While international and even global sales are possible for companies of all sizes, the issues with different governmental approaches to taxes and tariffs can discourage such expansion. A lack of understanding can also cause serious issues for enterprises that don’t achieve full compliance with relevant tax and tariff laws. When expansion reaches into many different countries, keeping track of all relevant laws and responsibilities becomes even more difficult. Additionally, errors cropping up across multiple international markets can be costly in terms of both finances and regulatory concerns.
Effectively managing landed cost issues
The wide range of different taxation and tariff strategies and forms employed across the globe can make discussion of total costs to an organization difficult, especially when concepts unfamiliar to U.S. businesses – like value added tax and goods and services tax – are used. Businesses utilize the landed cost concept to sum up the total costs related to selling products internationally. Landed cost represents all of the charges incurred by selling a product internationally, from transportation fees, handling costs and customs duties to the taxes and tariffs charged by another nation.
Calculating landed cost allows a company to use a singular figure in various accounting and analysis measures and understand the relative price of selling to a variety of different nations at a glance. Determining landed cost manually can cause problems. Additionally, it has to accurately and quickly incorporate any changes to the numbers involved, such as a tariff or tax rate changed by a foreign government. Mistakes of this nature can lead to shipping delays and products sitting in holding at customs, higher costs and lower satisfaction for customers and reduced profit margins for businesses.
Independent software vendor Avalara recently released Avalara LandedCost, a cloud-deployed solution that allows businesses with CRM or ERP solutions in place to accurately and automatically calculate landed cost. This fast and accurate approach to landed cost takes on tasks better served by automation – technical calculations, record keeping, checking and confirming the tax and tariff rates of foreign countries – and allows staff to focus on areas where their skills are more useful.
To help businesses learn more about the benefits of automating landed cost, The TM Group, Inc. and Avalara offer visitors a free resource: “5 Reasons to Automate Landed Cost.” Following the link allows you to download a valuable look at how using a modern solution for landed cost concerns improves outcomes and minimizes the many potential issues inherent in international sales.