Global Retail Transformation: Understanding Tax Implications

How should companies approach the complexities of unfamiliar tax environments when they expand into international markets?

The challenges are significant, especially given the fact that tax authorities’ strategies for addressing digitalisation and cross-border trade are in rapid flux. But that shouldn’t hold you back from carving out a stake in new market geographies if you keep these four principles in mind:

  1. Think long-term: New retail models are emerging at a rapid clip, and tax requirements are evolving along with them. Keeping your assumptions flexible and your eyes on the long game will ensure you don’t fall behind the curve.
  2. Don’t assume it is business as usual: The tax logic applied by foreign jurisdictions may be sharply different from what you’re used to. Imagine the challenges faced by a single-country European retailer encountering the complexities of U.S. indirect tax for the first time, with its numerous state and local tax authorities and ever-changing rules and rates. U.S.-based companies may face a similar test of their resourcefulness as they grapple with new requirements in an unfamiliar environment.  
  3. Study the tax implications of your supply chain: New business models may involve delivery to customers from numerous fulfilment centres or brick-and-mortar stores. Ship-to and ship-from locations may have implications for indirect tax, and the calculations can become very complex when transactions occur across borders.
  4. Consider developing partnerships and investing in technology solutions: Tax technologies can automate tax determination processes, making them seamless to the customer and fully transparent for the retailer. They can ensure your systems and processes are up to date with changing tax rates and requirements.

I discuss more about the tax topography of global retail in a new e-book published jointly by Vertex, SAP, and Deloitte: New Business Models In A New Global Landscape: Challenge Or Opportunity? The eBook also includes contributions from SAP’s Riad Hijal and Deloitte’s Holly Hamby. The publication covers technology platforms, selling models, legislative influences, and more. It offers a valuable set of signposts for businesses planning to explore unfamiliar market territories.

Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.

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Pete Olanday

Pete Olanday

Retail Practice Leader, Vertex Consulting

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Pete Olanday is Vertex Consulting Retail Practice Leader, responsible for the integration of Vertex's Indirect Tax solutions in the retail space, specifically with Point-of-Sale systems and e-commerce platforms. Prior to joining Vertex, Pete worked for IKEA and EY. Pete has a B.S. in information and decision sciences from Carnegie Mellon University.

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