Going Global 101: Tax & Tariffs for DTC Ecommerce Brands

Brian, thank you for joining us.

0:18 Brian Kelly

Thank you for having me.

0:20 Valerie Rose

And before we get started, we're going to have a Q&A session at the end. So please put all of your questions in the chat and we'll get to as many as possible at the end.

Okay, our agenda for today. Pieces of the global tax and tariff puzzle. We'll be talking about AvaTax with cross border, HS item classifications, global compliance, impending EU changes, improving your customer experience, and then Q&A at the end.

Brian, we're excited to have you here to shed some light on the complexities of global tax and everyone's current favourite buzzword, tariffs.

1:04 Brian Kelly

Absolutely. And it looks like we have questions already in the chat, and I'll be addressing some of those questions throughout. But if I miss them as I'm going through the presentation, Valerie, if you don't mind, maybe during the transitions you can throw the questions in as we go.

1:21 Brian Kelly

So the main thing I want to do, I want to break out what most customers are doing today, and how can we associate that with a global standpoint? Move to the next slide, Valerie, if you could.

1:39 Valerie Rose

Sure.

1:40 Brian Kelly

And here's what we've done as a partnership, as marketing, and as certain customers and partners know us for.

If you look to the right side of this slide, a lot of our customers understand what AvaTax is. It understands what the complexities are in the US sales tax arena.

1:56 Brian Kelly

Most of you on this call understand where LedgerGurus comes into play with item classifications with regard to taxability of those items. And then the other piece that LedgerGurus supports is, where do you have obligations to register? Where do you have obligations to file?

So it looks like Kerry's got a question, and I'll touch on that in the third piece, Kerry.

2:27 Brian Kelly

But the main point here is, I'm going to show you when we start to have conversations about expanding globally, you move over to the left side of this screen. I'm going to get into each one of these pieces of the puzzle to show you how we can relate what you know today to a global standpoint.

2:49 AvaTax as a global calculator

Brian Kelly

To the next slide. So first piece of the puzzle, we're going to get into AvaTax. Most of you again probably have a good understanding on the US side of things, and what AvaTax can do for you and how it supports you.

So move to the next slide and I'm going to correlate that with a global standpoint.

3:08 Brian Kelly

So think about AvaTax as a global solution. Currently, I only handle the global piece of things, but there are fifteen thousand different tax types in the US, I believe, and thirty thousand tax changes that have taken place in 2025.

3:27 Brian Kelly

Now take that same thought process and you relate that to not just taxes, now you bring tariffs into the mix. So where AvaTax is keeping track of all those complexities in the US, it also has the ability to keep track of all the complexities globally.

3:48 Brian Kelly

We heard a lot about tariff changes over the last two years, and AvaTax is that source of truth globally to help you keep up with both tax changes and complexities, and tariff changes and complexities.

So your thought process coming out of this call today would be, AvaTax is your global calculator for all of those complexities, not just here in the US, but internationally.

4:17 What to know before you expand

Valerie Rose

Okay. And Brian, before moving on, what do companies need to know before expanding globally?

4:26 Brian Kelly

Well, I've been doing this for over fifteen years, and there have been a lot of nightmare stories in the beginning. People dove into, we could just start expanding globally. That's not the case. You definitely need to be prepared.

4:40 Brian Kelly

Some of the pain points, and I'm going to say it's still happening today, a lot of the pain points, people would think they can get shipping rates internationally and away they go on their website.

Some of the terms that we've run against are abandoned carts. So yes, you can offer a shipping rate internationally, but if your customer is getting a bad experience, or your customers aren't aware of what those landed costs are, typically those cart conversions turn into cart abandonment.

5:17 Brian Kelly

When you start to ship things internationally, and I'll show you a few examples later on in this presentation, and you're not prepared for the accurate landed costs, that's going to be a poor customer experience and potentially a loss of a customer going forward.

So some of the things to be aware of, be proactive in the international world. Do not just dive in headfirst. Make sure you get with the LedgerGurus of the world, the Avalaras of the world, to make sure you're prepared.

5:54 Brian Kelly

Here's an example of a poor customer experience. We moved this up on this slide, and I thought it was a great idea.

I talk about poor customer experience. We're going to talk about surprise costs. We're going to talk about delayed products in customs. All can be avoided.

6:12 Brian Kelly

Now, here's an example, and read this. Me personally, I don't know that I would click on this link and reply to it. If I received this text message, I would not be clicking on it, nor would I be saying, yes, I need to pay an extra three hundred and eight dollars for inflated duties and taxes, because I wasn't aware of it.

6:34 Brian Kelly

So more than likely, not only are our customers internationally not clicking on this, if they do, they're not accepting these additional fees, because they're surprise costs and at times they're inflated costs. So this is an example of a poor customer experience in my opinion. And more than likely they will not show back up.

6:53 Valerie Rose

Right. Well, and it looks like a spam text, to be quite honest. It's not, but I wouldn't click that link either.

6:59 Brian Kelly

So we're going to get into some of the areas where we can help you be more prepared, and where we can avoid some of those poor customer experiences, to drive more cart conversions and ultimately drive more customers showing back up to your website.

7:15 Brian Kelly

So going globally, you definitely want to consider, where is the ecommerce platform? Are there connectors? Do we have relationships with these ecommerce platforms? Are you shipping delivery duties prepaid versus a delivery at place methodology?

And two more areas that we're going to get into are the self-serve tariff and the managed tariff code classification. So the identifiers for your products as well are super important.

8:04 HS codes, and what drives a tariff

Valerie Rose

All right, well LedgerGurus is here to help with product taxability codes in AvaTax or Shopify. But when we talk about expanding globally, what else should businesses be considering?

8:04 Brian Kelly

Okay. So as I mentioned earlier, we talk about taxability codes. We talk about understanding the taxability of a product. Super important when we're learning what those percentages should be when we're doing a calculation.

When we move products globally, the other item classification is that harmonised systems code. Two codes need to be identifying the same product when you're moving it internationally.

8:34 Brian Kelly

So the key part, I think it's pre-work in everyone's arena, if we're expanding globally. Harmonised systems codes are almost the passport for your physical goods going into a destination country. And I'll get into what I mean by that.

8:51 Brian Kelly

So just as I mentioned, LedgerGurus helping you with those tax codes. They do the research, they consult you on the product, and this way you're accurately calculating those taxes in the US.

We take that same code and we match it to your tariff code, or harmonised systems code. So now those destination countries can determine, one, is the product allowed to enter my country? And two, what's the tariff associated with that product?

9:27 Brian Kelly

Now you're going to have two line items. You're going to have a tax line item, what's that percentage? And you're going to have a tariff line item, what's that duty calculation as well? Both line items are just as important when you're moving physical goods to a destination country outside of where you're shipping from.

9:44 Brian Kelly

So what is an HS code? I'll let you tab through a few of these, Valerie, if you don't mind.

9:49 Valerie Rose

Sure.

9:50 Brian Kelly

It's one of those interactive things that you could just go through. Yeah, wait, missing some products or missing some line items. That's okay, so I can walk through what is an HS code.

10:07 Brian Kelly

So an HS code is made up of multiple things. And here's what I mean by things. Country of origin.

10:12 Valerie Rose

Yeah, you might want to back up. And you probably won't be able to get to it. It looks like it's locked out somehow, but that's okay.

10:18 Brian Kelly

Country of origin is super important. Where was that product manufactured?

Think about what's happening in today's world. And I'll give you an example. China, country of origin, shipping to the US means something totally different than China, country of origin, shipping to Australia or shipping to Canada. The relationships are what's being told within that HS code.

10:48 Brian Kelly

Country of origin. What is the product made of? What's the material? How was it constructed? What industry is that product for? Medical industry? Then at times that tariff could be free.

So all of those details are a lot further than a tax code, but that's what these countries need to see. They need to understand what are all those things. Is that product allowed? And now what's my relationship between those two countries? Manufacturing country, ship to country. All drives a varying tariff percentage.

11:23 Brian Kelly

And I don't know if you're going to be able to get to that. It looks like, click to the next slide. Yeah, it looks like, that's fine.

But keep in mind, as I mentioned, the country of origin. That example is huge. Country of origin China, and the relationship when you import to the US, means something totally different when you ship to Canada or ship to the rest of the world, or whatever those country relationships are.

11:52 Brian Kelly

That HS classification code drives that variation on tariff. It could mean a 20% tariff. It could mean a 5% tariff. The HS code determines that.

It's just like you and I. When we go into a destination country, we need to show that passport. So these HS codes are your passport for your physical goods.

12:21 Brian Kelly

This is just showing you here that, yeah, back up one, go back to that slide.

This slide here is, there are multiple ways to get to an HS code. There are ways that you can use speed, with more of an AI type of experience, and that speed will get you to an estimated HS code. Or you move to the right side of this screen where we have more of a managed type, where you have human intervention.

12:51 Brian Kelly

I'm at a conference this week, and AI, believe it or not, is not the hot button when it comes to tariff compliance. Reason being, there's a lot of legality behind identifying goods legally in importing them into a destination country.

13:10 Brian Kelly

There are certain environments where AI works. There are certain environments where you may have a self-serve type of atmosphere where you need to add those additional characteristics. And there are times where you want a compliance professional that looks at these products, determines the material, and then gives you the accuracy with those HS codes.

13:38 Brian Kelly

So there are variations on how to get to an HS code. And it depends on your order value, it depends on your product, depends on the material of your product. Like aluminium now has a different tariff assigned to it, and what's the percentage of aluminium?

So depending on your products, you don't want to dive headfirst into a just give me some HS codes and give me the cheapest way to get there. It may be the right approach. A lot of times it's not the right approach. So just know there are variations.

14:05 Brian Kelly

So stay on the left side here, the pain points. What happens when you have a wrong HS code? Look at the bottom part. Those HS codes are the passport. Your passport's wrong, your product's going to be stuck in customs. If your passport is wrong, you may get through customs, but that tariff percentage may be at a higher percentage.

14:28 Brian Kelly

So I've heard it for 15 years. We've never had a problem, therefore it must mean my HS code is accurate. That cannot be further from the truth as of these last couple years.

There have been over, just in North America alone, six hundred thousand tariff changes.

14:53 Brian Kelly

So if those HS codes are wrong, but it's not getting stuck in customs, someone is paying an inflated value for that tariff to enter that particular country. Whether it's your customer or whether it's your carrier billing you back, those rates more than likely have changed over the course of the last two years.

15:17 Brian Kelly

So again, just because it's not stuck in customs, do not take the approach, I haven't heard any issues, therefore there's no problem with my HS codes. Make sure they're accurate, because that's driving that tariff and duty percentage. Just think of it as the passport for your physical goods.

15:33 Global registrations and filing

Valerie Rose

Okay. And LedgerGurus is here to help with your US compliance needs, but let's explore how Avalara can help on the global scale.

15:44 Brian Kelly

Yep, hit the next slide. And this will answer a little bit of Kerry's question from the beginning.

So where we look at, and where we lean on LedgerGurus to do those registrations to make sure we're filing properly, similar things happen globally. So there are rules in Germany, there are rules in Europe, there are rules in Australia. Every country, almost like every state, has different thresholds and different rules.

16:17 Brian Kelly

So where we have a Germany trade show, and we may have employees work in the trade show, or sales in Germany, we have a support team locally in Europe that will walk you through the complexities of having a VAT registration set up for what you need to do in Germany.

16:37 Brian Kelly

There are all other mechanisms. Like what they call IOSS, if you look at that screen at the bottom left, that's what Europe considers import one stop shop.

So there are different types of registrations, whether I have employees, whether I have merchandise stored in a certain country, whether I'm selling into these certain countries. You may or may not need to be registered.

17:02 Brian Kelly

Those are the things that you want to lean on LedgerGurus for, and the partnership that they have with Avalara, to determine where do I have an obligation to make sure I'm registered, filing and submitting returns, based on the destination country sales, like I mentioned, supplies stored, or maybe even individuals that need to be registered for tax compliance.

17:33 Brian Kelly

So we talked about registrations. It's a global solution. So reach out to LedgerGurus. Make sure you understand all your complexities around the US as well as globally. You may have an obligation or you may not have an obligation to be registered and filing.

17:51 Brian Kelly

Classifications, if you're moving physical goods, just as I've been talking about with HS codes, make sure you have the correct codes.

I worked for FedEx Cross Border for a number of years prior to coming over to Avalara. Be careful that you're not relying on certain parties to know your product better than you. If it's your product, you know this better than any carrier would know it. You are the one that should be making sure these HS codes are accurate. Because a carrier, their job is to move boxes, because they have millions and millions of boxes to move on a daily basis. And they're not going to stop to confirm whether your HS code is accurately assessed. It's typically where you'll see inflated tariff rates.

18:40 Brian Kelly

Calculations, that centre part. Whether it's US or whether it's global, you need to understand if these tax codes are accurate, HS codes are accurate. You need a mechanism to make sure those calculations are accurate.

Because as I mentioned, the US had thirty thousand tax changes in 2025, and North America had over six hundred thousand tariff changes. So you don't want just a calculator that's looking at a stagnant percentage, because more than likely it's been changed and you're not calculating properly on a stagnant file.

19:24 Brian Kelly

Skipping over e-invoicing for a second, going into the returns and reporting. We have mechanisms in place. And again, reach out to your contacts at LedgerGurus to make sure we're understanding what you're doing globally, so we can lead you down the right path to say, you do not have an obligation to be registered, and here's why. Or yes, you have an obligation to be registered, and here's how we can help.

19:47 Brian Kelly

When we get into invoicing, and that's e-invoicing, that's when you have entities outside of the US for now. So if you have entities outside the US and you're selling B2B, business to government, eventually direct to consumer, e-invoicing is more prevalent in the European Union. And that government needs to understand what that invoice looks like before that filing even happens. So it's a direct communication with those foreign governments, and making sure they're prepared for that return filing. But we can get into that with you as well.

20:25 The EU de minimis change

Valerie Rose

Okay, so Brian, you've walked us through the basics of global compliance. Now let's talk about some of the impending changes that sellers need to be aware of, beginning on July first, 2026.

20:41 Brian Kelly

And this is another big one in the news today. So we all hear about what's happening in the US. We all hear about tariff changes. We've heard the word tariff, tariff, tariff every time you turn on the news.

Other countries are no different. They're making changes because they have felt that they've lost money, not just on tax, but now they're losing money on tariff with these low order values.

21:10 Brian Kelly

So this is super important if you're doing business in Europe. The European Union did away with what they call a de minimis, which is a threshold of your order value. If your order value in the past was under 150 euro, you did not need to pay any tariff on that particular transaction.

21:31 Brian Kelly

The EU just did away with that 150 euro de minimis, which means you will now pay tax and tariff on every order that you ship into the EU.

Two thresholds. You're still going to see that 150 threshold, but you're going to pay a certain flat rate for that particular product. Over 150, that HS code is going to trigger the appropriate tariff percentage and calculation.

22:04 Brian Kelly

So this is super important if anyone is transacting under 150 euros into Europe today, or looks to do that. You need something to make sure it accurately calculates that specific tariff for that particular product.

22:23 Brian Kelly

And go into the next slide. There's one more slide. There might even be two.

I don't know if this is an advantage, or how they're going to police this, but if it's two of the same product, as long as it's on your customs documentation properly as two of like for like products, you will only pay three euro, because it's only paid on unique HS codes.

22:48 Brian Kelly

Example two, it doesn't matter if it's a short sleeve and a long sleeve, or a short sleeve and a hoodie. Both have different HS codes, therefore both will be assessed that three euro fee. So you're adding six euros to this particular transaction moving forward as of July first.

23:10 Brian Kelly

Maybe one more slide, Valerie. No. Okay, you've got the updated one. Yep. So just keep that in mind. That's one of the pressing ones that's happening within a week.

23:21 Customer experience, and questions

Valerie Rose

Great. And Brian, how do all the pieces of the puzzle come together to impact the customer experience?

23:28 Brian Kelly

I'll move to the next slide real quick. Oh, hopefully this doesn't mess things up, because there's a bunch of things going on here. Let me see, hit the next one down. Back to that. Okay, all right, that's okay. Go back to the main screen so people aren't looking at some weird slides. You can keep it there actually. And this is missing a whole bunch of movements here. But it's weird enough, it's picking up the most important.

23:59 Brian Kelly

So how do all of these pieces of the puzzle fit in? When you're moving physical goods, in my opinion, step one, identify your products properly. That's make sure you get to that correct harmonised code. And make sure you understand the fully qualified code to the country you're delivering to.

24:18 Brian Kelly

Again, it's that passport. If you don't have a passport, that product is not clearing customs. Customs is holding that up.

And most of the time that international consumer needs to call within a week or two and say, I never received my parcel. The US merchant then calls FedEx, UPS, DHL. What happened to my parcel? You didn't clear it.

24:46 Brian Kelly

FedEx, UPS, DHL starts to scramble. Then they apply a code. They don't even know your product. They're guessing. They apply a code for clearance purposes. I just need to get this cleared.

They're not taking into consideration whether it's the most accurate tariff. They're not taking into consideration what the materials are, country of origin, all of those things. They're clearing it. And typically that's inflated, because they always err on the higher side of the tariff.

25:15 Brian Kelly

Now your customer gets that product. If they paid it delivery duties prepaid, there are no delays in customs and there are no surprise costs.

If they ship it without an HS code and it's stuck in customs, it's going to be delayed. And then the end consumer is going to have to pay the duties and taxes when the product arrives at their doorstep.

25:40 Brian Kelly

Not a pleasant experience when that product has been sitting for over a week, it doesn't arrive, they make phone calls, it finally arrives, and now someone's knocking on the door for additional funds. Typically they'll say, not my problem, send it back.

So the US merchant, if they're not doing it properly, they're going to get poor customer experience and returned goods.

26:08 Brian Kelly

So make sure you have your harmonised codes accurately. Make sure you're accurately calculating duties and taxes real time at checkout. And tell your carrier to ship it delivery duties prepaid. Best customer experience. No surprise costs, no delays in customs.

26:31 Valerie Rose

Absolutely. Okay, we are ready for the Q&A portion. And you can scan this QR code on the screen to submit your questions, or you can type it in the chat.

And Brian, we already have one in the chat, as I'm sure you saw. It says they're going to a trade show in Germany later this year, so yes, they're going to be charging German tax.

27:00 Brian Kelly

So this is where this partnership between Avalara and LedgerGurus will pay off for you, Kerry, because we will introduce you to our UK team that knows all the complexities around Germany, all the complexities around the sales within Germany.

And if there are German consumers purchasing locally, it may just be VAT. If it's outside of Germany and they need to ship the product, then we may need to consider VAT and tariffs for that particular transaction.

27:36 Brian Kelly

So this might be a takeaway for everyone, Valerie and Kelley on the call. Let's make sure we follow back up with Kerry and get her with the right team to see if there's an obligation in Germany for registrations.

27:49 Valerie Rose

Absolutely. Haven't seen any more questions come through.

I have something that I've seen quite commonly with a lot of my partners' clients that are selling internationally. What happens from the customer's point of view when the product just never shows up? Does the customer still get charged for that product and then they just never get it? What does that picture look like, Brian?

28:17 Brian Kelly

Yeah, so I went through the nightmare of a story where a merchant in the US doesn't clearly identify their parcel, and it's a nightmare where the end consumer needs to call, track it down, and everyone's scrambling to find the parcel.

There are times where customs clearance, they are not a warehouse. They will destroy that parcel and move on.

28:47 Brian Kelly

So that is actually a real live scenario, that an international consumer may never receive that parcel, for multiple reasons. And typically, no HS code, no passport, no entry into that country. Or that HS code triggers the fact that that could potentially be a restricted product from entering that country.

29:13 Brian Kelly

So just because you ship a pen into Singapore, ballpoint pen into Singapore, it's not allowed. Who knows that? The HS classification code identifies it, knows which products, as odd as it may seem, are restricted from going into certain countries. And if that customs clearance agent sees it, they're not spending the money to ship it back. They're destroying it and moving on.

29:40 Valerie Rose

I think it might be bubblegum into Singapore and ballpoint pens into Malaysia, or something along those lines that you wouldn't think of. But they happen.

29:49 Brian Kelly

And here's another thing. If a country has a specific industry, and here's the whole reason behind these tariffs, they want to protect that industry. Therefore they'll put a higher tariff percentage on importing of the same products. This way they don't jeopardise their own industry by allowing outside countries to import the same products that they specialise in. So it happens a lot.

30:22 Valerie Rose

Okay. The other one that I get a lot is just asking how they can stay up on all the different tariff rates and changes, with all of the tariff changes that are constantly happening.

30:39 Brian Kelly

And I would tell you, since I've gone through it over the last two years, an Excel file, a stagnant file, is not the way to go. You definitely need an automated tool that will help you keep up with thirty thousand US tax changes, fifteen thousand tax types, and six hundred thousand tariff changes.

31:13 Brian Kelly

We have companies today that specialise in shipping products globally. Carriers, freight forwarders, brokers, they're calling companies like ourselves that will help keep up and automate what those tariffs should be at the time of shipping. Because they could have changed last week. And if you're looking at a file from a month ago, they're not accurately being calculated.

31:41 Valerie Rose

Okay. Well, I haven't seen any other questions come through. We have just a little more time here. Anybody has final questions?

31:54 Valerie Rose

We actually do have a couple of questions from Nirav. One of them is, is most of what you've discussed for a US incorporated company paying US taxes? What if you are incorporated elsewhere? And the other question is, if you are using Avalara, is it possible to look up the company's costs and issues prior to introducing new products?

32:12 Brian Kelly

The answer is yes and yes.

So when Avalara gets involved and LedgerGurus gets involved, it's not just a US outbound or another country in. It's a global, from anywhere to anywhere type of calculator.

32:31 Brian Kelly

And yes, you certainly can be proactive and understand what those rates are. We have customers that come to us and say, we don't necessarily need it to calculate, because we're not generating an invoice, we're not doing ecommerce. We just want to audit and make sure our broker, our carrier, is charging us the correct amount.

32:53 Brian Kelly

So we have companies that come to us and say, we want to run our product catalogue through your HS classification tool. And we want you to tell us what that tariff percentage is and what that tax percentage is, so we can utilise it as an audit tool.

So great question, and the answer is yes. And I've seen so many different variations, but just know it's not a one-size-fits-all.

33:21 Brian Kelly

It could be you're using it just for audit purposes. You could be using it for calculation on ecommerce. You could be using it in your ERP for invoicing purposes. And it's from anywhere to anywhere. Just make sure you clearly define what your product is in a taxability environment and in a tariff environment.

33:43 Valerie Rose

Kelley, any other questions on your side that have come through?

33:45 Kelley Birrell

No, I don't see any others.

33:49 Valerie Rose

Okay. Well, with that, thank you so much for joining us today. And again, if you have any other questions, please follow up with us after the fact, and we can also connect you with Avalara for any of your global compliance needs.

Thank you everyone.