Sales tax in the United States is complex, but because Americans are raised with it, the thousands of jurisdictions and special taxes seem to make (at least a kind of) sense. As soon as a company starts making overseas exports, the level of complexity increases significantly — especially because many other countries use tariff and import fee types that are unheard of in the United States.
Every nation sets its import tariff and duty rates based on its own unique circumstances. In general, less developed countries have higher tariff rates than more developed ones, and seven of the 10 countries with the highest harmonized tariff rates are located in the relatively-undeveloped area of sub-Saharan Africa.
In developing and developed nations alike, high import fees are sometimes charged on specific goods as a protectionist policy, in order to boost domestic industry. In others, import fees are charged on items perceived as luxury goods, or which are seen as having significant social impact (such as cars).
No matter what goods you’re exporting, selling to a new country for the first time can present unforeseen compliance challenges. Value added tax (VAT), goods and services tax (GST), and import duties or special tariffs can all add significant cost to transnational transactions. When all of these costs are added together to make a total cost for a good shipped overseas, the total sum is called the landed cost.
When businesses try to manually calculate the landed cost of their shipments, it’s easy to forget one or more components — especially when shipping to unfamiliar countries. Even if you remember everything, using outdated information or making a mistake about a jurisdictional border could mean problems at customs clearance, extra charges to your customer, or a chunk eaten out of your profit margins.
At Avalara, we’re always seeking out a new way to make tax compliance easier. This year, we’ve made it easier than ever to start exporting while maintaining full compliance. With Avalara LandedCost, cloud-based automation of landed cost calculation is a click away. This state-of-the-art calculation solution gets rid of surprises at customs, keeping customer satisfaction and profits high.