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Avalara's 2026 Tax Outlook: Emerging Trends in Global Compliance

As businesses worldwide prepare to navigate the complexities of tax regulations in 2026, Avalara, a prominent leader in automated tax compliance, has unveiled its annual outlook, highlighting key trends that will significantly affect operations. This year's edition of the Avalara Tax Changes report emphasizes the increasing challenges tied to compliance costs, expansive tax obligations, and the swift pace of digitalization in taxation.

Rise in Compliance Costs and Challenges

The Avalara report notes that businesses will encounter heightened compliance costs as governments intensify their efforts to broaden tax bases. In the past year, nine states in the U.S. expanded their sales tax bases, with a keen focus on digital goods and services. As states like Georgia, Kansas, and Pennsylvania look to implement similar changes, it's clear that the long-standing tax frameworks are undergoing a reevaluation to align more closely with a service-driven economy.

Scott Peterson, Vice President of Government Relations at Avalara, remarked, “What we've observed is a concerted shift toward taxing digital services and marketplace activities. The expansions we've seen in 2025 indicate a broader trend that will likely continue into 2026.” This evolving landscape means businesses must stay vigilant in adapting to new compliance frameworks that will inevitably lead to increased operational complexities.

Global Trade Dynamics and Tariff Changes

An essential component of Avalara’s analysis focuses on the effect of tariff volatility and the repeal of the de minimis threshold by the U.S. government. The surge in U.S. tariff activity, which resulted in nearly 3 million new tariff rates, has caused a significant shift in international commerce. The de minimis threshold repeal mandates that all international shipments undergo stringent customs documentation, substantially raising import costs and compliance risks for global sellers.

Craig Reed, General Manager of Cross Border at Avalara, pointed out that while the U.S. may slow down its pace regarding tariff changes, the potential for punitive measures in response to global events remains high. “As we continue to witness the completion of U.S. trade agreements, it’s crucial for other nations to pursue their own trade pacts to counteract the U.S.’s protectionist policies,” he emphasized.

The Acceleration of Digital Tax Administration

Another important trend highlighted in the report is the accelerating shift toward digital taxation. Over 60 countries are embracing mandatory e-invoicing and real-time tax reporting, spurred by initiatives such as the EU's VAT in the Digital Age (ViDA). This move towards automation signifies a transition away from traditional methods, pushing businesses to adopt scalable technologies for tax compliance.

Matt Hammond, General Manager of E-Invoicing at Avalara, stated, “E-invoicing is becoming a core element of business compliance in a digital landscape. Companies can no longer rely on disjointed local solutions to address each jurisdiction's mandates.” As these digital solutions become essential, businesses are required to invest in updated compliance technology to meet evolving regulations.

Conclusion

As Avalara's 2026 Tax Changes report demonstrates, businesses globally must prepare for an evolving compliance landscape characterized by expanding tax obligations and increased scrutiny from tax authorities. The challenges posed by new digital mandates, tariff volatility, and rising compliance costs will necessitate that companies adopt agile strategies and comprehensive technology solutions. To better understand how these shifts may impact your business operations moving forward, download the full report from Avalara's website today.

For over two decades, Avalara has been at the forefront of tax compliance, providing robust solutions to help businesses navigate the complex tax landscape across more than 75 countries. As the tax landscape continues to change, Avalara remains committed to empowering businesses with the tools necessary for compliance.