Grow global: 5 reasons to automate landed cost calculation
Today’s customers no longer tie themselves down to vendors in their city — or even in their country. Global ecommerce and the rise of shopping cart software make it easier than ever for businesses and consumers alike to place orders from around the world.
Soon after starting to ship overseas, though, many companies find that they may have bitten off more than they can chew. Complicated duty rates, import fees, value-added tax (VAT) and other transactional taxes can increase landed cost (the total cost of a shipment sent overseas), often unexpectedly.
In this white paper, we’ll look at how calculating landed cost using an automated solution, like Avalara LandedCost, can improve your overall tax compliance, your bottom line, and your relationship with customers.
#1: Prevent shipment rejection
Some companies think that once they’ve calculated duty rates, they’ve got international tax compliance covered. The reality is much more complex. Duty rates and the original item price aren’t the only components of a landed cost calculation. VAT and country- or item-specific import fees can drive up costs, creating the potential for sticker shock when your shipment arrives at its final destination.
Failing to calculate even one aspect of the total landed cost can lead to difficult situations. If your company’s policy is to pick up the tab for these extra fees, those costs are passed onward to you. If the customer is on the hook for more money than they expected at the time of purchase, they may choose to reject the shipment and send it back for a refund.
When shipments are rejected, it’s a pain for everyone involved. By using the fully automated landed cost calculator offered by Avalara LandedCost, you can forget the headache of shipment rejection. By taking into account not only duty rates but also VAT, special fees, and more, LandedCost eliminates “surprise” costs for you and your customers.
#2: Save time with every shipment
Trying to untangle the import duties, VAT rate, additional fees, and de minimis (minimum value before duty is charged) for shipments isn’t easy. Not only does every country have different rates and rules, but these rates and rules can change significantly from product to product in your catalog.
While calculating these rates manually might work for a business that only makes international sales to one or two countries, or sells just a handful of products, every expansion of your customer base or your product line adds complexity to your transactional tax compliance picture. By automating the entire process of calculation, you can erase the growing pains associated with shipping more products to more countries.
#3: Keep the taxman happy
As countries around the world seek to increase tax revenue, auditors and tax enforcement personnel are being hired to make sure scofflaws are caught and made to pay. When companies avoid paying the taxes and duties they owe internationally, the penalties can be severe – up to and including being banned from making shipments to the country where taxes were avoided. Even if you’re allowed to continue doing business there, fines and additional fees may also be assessed if you are found to be out of compliance.
That’s the kind of situation that doesn’t make anyone happy. By calculating total landed cost using Avalara LandedCost, you can rest easy, knowing that you haven’t forgotten anything that would land you in hot water with tax authorities.
#4: Build customer relations
Some companies that ship overseas don’t think they need an automated solution to calculate landed cost. Usually, these are companies who charge the customer any duties or taxes owed, and often don’t consider themselves responsible for calculating or understanding landed cost.
Today’s ecommerce world, though, is more competitive than ever before. Even if buyers don’t reject shipments outright, unexpected costs will always decrease customer satisfaction. By providing each customer with a landed cost estimate, businesses can make customers happier.
Using Avalara LandedCost isn’t just for companies that want to include the total cost of import taxes and duty as part of an invoice. It’s also for any business that wants to provide an extra level of courtesy to their customers. When buyers know a seller will provide them with complete cost information, who will they be more likely to buy from: the seller who communicates, or the one that makes them guess how much they’ll owe?
#5: Stay up to date with changes
Just when you’ve finally gotten a handle on the duty and VAT rates and rules for one of the countries where your customers live, you spot a newspaper headline: “VAT changes expected.” As national governments seek revenue sources and try to stop tax scofflaws, frequent changes to tax and import fee rates and rules are the rule, not the exception.
Keeping up with newly-proposed legislation and following rule changes is the only way to ensure that your final landed cost calculation will be accurate. With Avalara LandedCost, you never need to worry about manually updating a new rate. With the peace of mind that comes from always-updated, cloud-based software, plus Avalara’s experience as an industry leader in transactional tax, you can have more confidence than ever in landed cost calculation.
For more information on how automation can make it easier for your business to grow global, visit landedcost.avalara.com today.
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