US Tax Archives - Midia Drummond

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Is SaaS subject to Sales Tax in the United States? The answer depends on the state, the type of software, the customer’s profile, and whether the company has established nexus. In 2026, technology companies need to monitor not only current rules but also changes already approved for 2027, particularly in California and Colorado. For a […]

/ By Marcos Ferreira

Is SaaS subject to Sales Tax in the United States? The answer depends on the state, the type of software, the customer’s profile, and whether the company has established nexus.

In 2026, technology companies need to monitor not only current rules but also changes already approved for 2027, particularly in California and Colorado.

For a foreign company selling subscription-based software to customers in the United States, the question is not simply, “Do I need to pay Sales Tax?”

The proper analysis involves at least four questions:

Is the SaaS taxable in the customer’s state?
Does the company have Sales Tax nexus in that state?
What rules apply based on the product, the customer, and how the software is delivered?
Is the company properly registered, collecting, filing, and remitting the tax?

Since the U.S. Supreme Court’s decision in South Dakota v. Wayfair in 2018, a company can establish economic nexus in a state even without an office, employees, or another form of physical presence there.

For SaaS companies, this is particularly relevant. A business may be headquartered in another country, have a small team in the United States, and still reach enough customers across multiple states to trigger Sales Tax obligations.

In 2026, the landscape is also changing rapidly. California and Colorado have already approved changes that will expand the taxation of software and SaaS beginning January 1, 2027.

What Is SaaS Sales Tax?

SaaS, or Software as a Service, is a model in which customers access software hosted by the provider, typically through a monthly or annual subscription.

Unlike traditional software installed locally on a customer’s device, the customer generally does not receive possession of a physical copy of the software.

Examples of SaaS include:

CRM platforms
Enterprise management systems
Marketing tools
Human resources platforms
Accounting software
Data analytics tools
Customer service platforms
Security software
Collaboration systems
Artificial intelligence tools

The tax issue arises because U.S. states do not have a uniform definition or tax treatment for these products.

One state may treat SaaS as a taxable service. Another may consider it nontaxable. A third may apply different rules depending on whether the software is used for business or personal purposes.

Therefore, there is no single federal Sales Tax rule for SaaS in the United States.

Why Is SaaS Sales Tax So Complex in the U.S.?

The United States does not have a national Sales Tax system equivalent to a federal VAT.

Consumption taxes are primarily imposed at the state and local levels.

This means a company may need to deal with:

State rules
Municipal rules
Counties
Special taxing districts
Different definitions of SaaS
Sourcing rules
Economic nexus
Physical nexus
Exemption certificates
Filing frequency
Specific B2B and B2C rules

In addition, tax rates can vary significantly depending on the customer’s location.

The Tax Foundation estimates that 45 states have a statewide Sales Tax and 38 allow local Sales Taxes, illustrating why the final tax rate depends on the specific jurisdiction.

Therefore, a company should not simply use the “state tax rate” to determine how much Sales Tax to charge a customer.

Is SaaS Taxable in Every State?

No.

The taxability of SaaS varies significantly from state to state.

Based on surveys and guidance updated for 2026, some states generally tax SaaS, some generally do not, and others apply conditional rules based on the type of customer, product, or method of delivery.

The table below provides a general overview for 2026.

Important: This table is intended as an initial reference. The tax treatment of a specific product should be analyzed based on the laws and guidance currently in effect in the applicable jurisdiction. Sales Tax rules can change, and certain local jurisdictions may have their own requirements.

SaaS Sales Tax: State-by-State Overview for 2026

Jurisdiction	SaaS in 2026	Key Consideration
Alabama	Taxable	Software is generally taxable.
Alaska	Depends on the locality	Alaska has no general statewide Sales Tax, but many local jurisdictions impose sales taxes.
Arizona	Taxable	SaaS may be subject to Transaction Privilege Tax.
Arkansas	Generally nontaxable	Treatment depends on the nature of the transaction and product.
California	Nontaxable through 12/31/2026	Beginning 01/01/2027, SaaS and prewritten software will fall within the scope of Sales and Use Tax under SB 122.
Colorado	Generally nontaxable in 2026	Legislation enacted in 2026 expands software taxation beginning 01/01/2027.
Connecticut	Taxable	SaaS used for business purposes may be subject to a reduced rate or different treatment.
Delaware	No statewide Sales Tax	Delaware does not have a general Sales Tax.
District of Columbia	Taxable	SaaS is subject to local tax rules.
Florida	Generally nontaxable	Hosted SaaS is generally not subject to Florida’s statewide Sales Tax.
Georgia	Generally nontaxable	SaaS is generally not treated as a taxable service.
Hawaii	Taxable	The General Excise Tax broadly applies to business activities.
Idaho	Generally nontaxable	Hosted SaaS is generally not taxed.
Illinois	Generally nontaxable at the state level	Certain local jurisdictions may have different rules.
Indiana	Generally nontaxable	Treatment depends on the nature of the transaction.
Iowa	Conditional	Treatment may vary depending on whether the software is used for business or personal purposes.
Kansas	Generally nontaxable	SaaS is generally not treated as a taxable service.
Kentucky	Taxable	Software and related services may be subject to tax.
Louisiana	Taxable	SaaS may be subject to state and local Sales Tax.
Maine	Generally nontaxable	SaaS is generally not taxed.
Maryland	Taxable	Treatment may vary between business and personal use.
Massachusetts	Taxable	SaaS and related software services may be subject to tax.
Michigan	Generally nontaxable	Tax may apply when there is a downloadable software component.
Minnesota	Generally nontaxable	Hosted SaaS is generally not subject to Sales Tax.
Mississippi	Taxable	The Department of Revenue considers revenue from software and related services taxable.
Missouri	Generally nontaxable	Treatment depends on the specific nature of the transaction.
Montana	No general statewide Sales Tax	Montana does not have a general statewide Sales Tax.
Nebraska	Generally nontaxable	Certain related products or services may receive different treatment.
Nevada	Generally nontaxable	Hosted SaaS is generally not taxed.
New Hampshire	No general statewide Sales Tax	New Hampshire does not have a general statewide Sales Tax.
New Jersey	Generally nontaxable	Hosted SaaS is generally not taxed.
New Mexico	Taxable	The transaction may be subject to Gross Receipts Tax.
New York	Taxable	SaaS is generally treated as a taxable service subject to Sales Tax.
North Carolina	Generally nontaxable	SaaS is generally not included among taxable services.
North Dakota	Generally nontaxable	Hosted SaaS is generally not taxed.
Ohio	Conditional	Treatment may vary depending on whether the software is used for business or personal purposes.
Oklahoma	Generally nontaxable	SaaS is generally not taxed as a service.
Oregon	No general statewide Sales Tax	Oregon does not have a general statewide Sales Tax.
Pennsylvania	Taxable	SaaS is generally subject to Sales Tax.
Rhode Island	Taxable	The tax authority confirms taxation of SaaS, IaaS, and PaaS in certain circumstances.
South Carolina	Taxable	SaaS may be subject to Sales Tax.
South Dakota	Taxable	SaaS is subject to applicable state tax rules.
Tennessee	Taxable	SaaS is generally taxable.
Texas	Taxable	SaaS is treated as a data processing service, with 80% of the charge subject to tax and 20% exempt.
Utah	Taxable	Prewritten software, including hosted software, is taxable.
Vermont	Taxable	SaaS is generally subject to Sales Tax.
Virginia	Generally nontaxable	SaaS is generally not taxed.
Washington	Taxable	SaaS is treated as a digital automated service and is subject to state tax rules.
West Virginia	Taxable	SaaS is generally taxable.
Wisconsin	Generally nontaxable	Hosted SaaS is generally not subject to Sales Tax.
Wyoming	Generally nontaxable	Hosted SaaS is generally not taxed.
Puerto Rico	Taxable	The jurisdiction has its own Sales and Use Tax rules.

The matrix above primarily uses TaxJar’s 2026 SaaS taxability survey, supplemented by official state sources and 2026 legislative updates.

Can a Foreign Company Have Sales Tax Nexus in the U.S.?

Yes.

This is one of the most important considerations for Brazilian companies expanding into the U.S. market.

Imagine a software company headquartered outside the United States that sells a $100-per-month subscription to hundreds of customers in the U.S.

The company has no U.S. office but has customers in:

Texas
New York
Florida
California
Washington

If sales exceed the applicable economic nexus thresholds, the company may need to:

Register for Sales Tax
Obtain a permit
Set up tax collection
File Sales Tax returns
Remit the tax to the states
Maintain compliance documentation

This can happen even if the company does not form an LLC or hire employees in the United States.

This is one of the reasons tax planning should keep pace with a company’s commercial growth.

What If the Customer Is a Business?

The fact that a sale is B2B does not automatically mean it is exempt from Sales Tax.

This is another particularly important consideration for SaaS companies.

Some states have specific rules for business use, while others tax SaaS regardless of whether the customer is an individual or a business.

In Texas, for example, SaaS is treated as a data processing service, and the law provides a 20% exemption for the charge for this service, making 80% taxable.

Connecticut and Maryland also have specific rules related to business use.

Therefore, a SaaS company needs to analyze not only who purchased the software, but also how the software will be used.

How Is Sales Tax Calculated?

Even when SaaS is taxable, another question remains:

What tax rate applies?

In the United States, the rate may consist of:

State Sales Tax
County tax
City tax
Special district tax

The Tax Foundation shows that combined rates can vary significantly between jurisdictions.

Therefore, a company selling SaaS to customers in different cities should not simply apply one tax rate across the entire state.

Simplified Example

A company has customers in:

Austin, Texas
Houston, Texas
Dallas, Texas

Although all three customers are located in the same state, the final applicable rate may vary depending on the specific location and sourcing rules.

The billing system needs to correctly identify the buyer’s jurisdiction and apply the corresponding tax rules.

What Are the Main Risks of Noncompliance?

A company that should have collected Sales Tax but failed to do so may face:

Retroactive tax assessments
Interest
Penalties
Audits
Defense costs
The need to correct prior periods
Due diligence issues
Impact on M&A transactions
Difficulties during fundraising

There is also a commercial issue.

If a company discovers that it should have been collecting Sales Tax for years, it may have to decide between:

absorbing the tax or trying to pass it on to the customer.

For a SaaS company with long-term contracts, this difference can have a significant impact on margins and cash flow.

What Should a SaaS Company Do Before Entering the U.S. Market?

For Brazilian and other foreign companies planning to sell SaaS in the U.S., a proactive approach can include the following steps:

1. Map Your Customer Locations

Create a reliable database containing customer locations and sales volume by state.

2. Determine the Taxability of the Product

Analyze exactly what is being sold.

SaaS, downloadable software, PaaS, IaaS, support, and consulting may receive different tax treatment.

3. Evaluate Physical Nexus

Review employees, offices, representatives, inventory, and other forms of physical presence.

4. Evaluate Economic Nexus

Compare sales against each state’s economic nexus thresholds.

5. Review B2B Rules

Do not assume that business customers are automatically exempt.

6. Review Contracts and Invoices

Determine whether software and services are properly segregated.

7. Register When Required

Once a tax obligation is identified, the company should evaluate Sales Tax registration before beginning to collect the tax.

8. Configure Billing

The system needs to correctly determine:

Customer location
Taxability
Tax rate
Exemption status
Tax amount

9. Establish a Compliance Process

Registration is not the end of the process.

The company must continue monitoring:

Filing frequency
Returns
Payments
Legislative changes
New states where the company establishes nexus

10. Monitor Future Changes

For 2027, California and Colorado should already be on the radar of any SaaS company selling to customers in those states.

Conclusion

SaaS Sales Tax in the United States is far from uniform.

In 2026, some jurisdictions directly tax SaaS, others do not, and some apply conditional rules based on the type of customer, product, or method of delivery.

At the same time, the landscape is evolving rapidly.

California will begin taxing certain software and SaaS products on January 1, 2027, while Colorado will also expand software taxation beginning on the same date.

Washington has already expanded its taxation of certain digital services, demonstrating a broader trend among states seeking to adapt their tax systems to the digital economy.

For international SaaS companies, the primary risk is not simply failing to identify the correct tax rate.

The challenge is determining when the company has established nexus, whether the product is taxable, where the sale should be taxed, and how to comply with registration, collection, filing, and remittance requirements.

Therefore, an effective U.S. expansion strategy should consider Sales Tax from the beginning, particularly when the company operates under a recurring revenue model and serves customers across multiple states.

How Can Drummond Advisors Help?

Expanding a technology company into the United States involves tax, accounting, and structural decisions that need to keep pace with the business as it grows.

Drummond Advisors helps international companies enter and operate in the U.S., including accounting, taxation, business structuring, and compliance services.

For a SaaS company, this means evaluating not only its corporate structure but also the tax obligations that may arise as the business acquires customers across different states.

Want to understand how Sales Tax rules may affect your company in the United States? Contact Drummond Advisors through the available chat or by email at info@drummondadvisors.com and speak with our specialists.

Written by Marcos Ferreira, Content Analyst at Drummond Advisors

Sources

TaxJar: SaaS Sales Tax by State
TaxJar: Economic Nexus by State
Tax Foundation: State and Local Sales Tax Rates 2026
Tax Foundation: 2026 State Tax Competitiveness Index
Streamlined Sales Tax: Remote Seller FAQs
Texas Comptroller: Taxable Services and Data Processing
California CDTFA: Software and Sales Tax Rules
PwC: California SB 122 and SaaS Taxation Beginning in 2027
Colorado General Assembly: HB26-1223
Washington Department of Revenue: Services Subject to Sales Tax
Washington Department of Revenue: Digital Products and SaaS
Mississippi Department of Revenue: Software and Software Services
Rhode Island Division of Taxation: SaaS, PaaS, and IaaS Ruling
Utah State Tax Commission: Computer Service Providers

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Filing a tax return accurately is one of the most effective ways to stay compliant with the Internal Revenue Service (IRS). Although the word “audit” often causes concern, being selected for an IRS examination does not necessarily mean that a taxpayer has done something wrong. In many cases, the agency simply needs additional information to […]

/ By Paola Atzingen

Understanding how IRS audits work and adopting good tax compliance practices can help individuals and businesses reduce the likelihood of facing unnecessary scrutiny.

What Is an IRS Audit?

An IRS audit, officially referred to as an examination, is a review of an individual’s or business’s financial records to determine whether the information reported on a tax return is accurate and complies with federal tax laws. Depending on the circumstances, the IRS may request documentation to verify income, deductions, credits, or other reported items.

In most cases, the IRS begins the audit process by sending an official notice through the U.S. mail. While an IRS representative may contact a taxpayer later in the process, the agency does not initiate audits through phone calls, emails, text messages, or social media.

What Can Trigger an IRS Audit?

Although some tax returns are selected randomly, most audits result from inconsistencies or reporting patterns that require further review. Common factors include unreported income, mathematical errors, deductions or tax credits that appear disproportionate to a taxpayer’s income, and discrepancies between the information reported on a return and records received by the IRS from employers, financial institutions, or other third parties.

Taxpayers with foreign financial reporting obligations who fail to disclose required accounts or assets may also attract additional scrutiny. Likewise, individuals and businesses with higher levels of income are statistically more likely to be audited than the average taxpayer.

The IRS generally conducts three types of audits. A Correspondence Audit is handled by mail and usually involves requests for specific documents. An Office Audit requires the taxpayer to meet with an IRS representative at a local office, while a Field Audit is the most comprehensive, taking place at the taxpayer’s home, business, or accountant’s office.

Best Practices to Reduce Your Risk

While no strategy can completely eliminate the possibility of an audit, maintaining organized financial records and preparing tax returns carefully can significantly reduce the risk.

Keeping receipts, invoices, bank statements, and other supporting documentation makes it easier to substantiate the information reported on a return. Reviewing tax forms before filing helps identify calculation mistakes and inconsistencies, while reporting all sources of income ensures that IRS records match the taxpayer’s return.

It’s equally important to claim only deductions and tax credits that are properly documented and supported by applicable tax rules. If the IRS requests additional information, responding promptly and accurately can help resolve the matter more efficiently.

For companies and investors operating across borders, another critical factor is having the right international structure in place from the beginning. A well-designed cross-border structure helps ensure compliance with U.S. reporting obligations while minimizing reporting gaps and inconsistencies that may attract IRS scrutiny.

International operations involving foreign corporations, partnerships, trusts, financial accounts, or related-party transactions often trigger specific reporting requirements, including Forms 5471, 5472, 8865, 8938, 3520, as well as the FBAR (FinCEN Form 114). Failing to identify and meet these obligations—even unintentionally—can lead to significant penalties and increase the likelihood of an IRS examination.

Proper planning goes beyond tax efficiency. When an international structure is established with clear entity classifications, ownership mapping, and well-documented intercompany transactions, businesses are better positioned to meet their reporting obligations, maintain consistent documentation, and respond confidently to IRS inquiries. In this sense, sound international structuring serves as a key compliance strategy, helping reduce audit risks while supporting long-term cross-border operations.

For businesses, foreign investors, and individuals with more complex tax situations, working with experienced tax professionals provides an additional layer of confidence. Professional guidance helps ensure compliance with current regulations, minimizes reporting errors, and prepares taxpayers to respond effectively if questions arise.

An IRS audit is not necessarily an indication of wrongdoing, but rather a process designed to verify the accuracy of tax filings. By maintaining complete records, reporting information consistently, and seeking professional tax guidance when needed, taxpayers can significantly reduce the likelihood of an examination and navigate the U.S. tax system with greater confidence.

Avoid costly tax mistakes before they happen. Whether you’re an individual taxpayer, a foreign investor, or a company with international operations, Drummond Advisors helps clients navigate U.S. tax obligations, strengthen compliance, and build the right international structure to minimize audit risks. Contact our team to learn how we can support your business.

Written by Paola Von Atzingen and Maikon Luiz

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Internationalizing operations can be a major milestone for millions of entrepreneurs around the world. Expanding into new markets, increasing opportunities, and strengthening a company’s positioning are strategic moves that, while promising, require time, planning, and careful attention to a series of bureaucratic processes. But after all, how long does it take? The answer depends on […]

/ By Paola Atzingen

But after all, how long does it take?

The answer depends on several factors. Every business has its own particularities and requires specific attention when it comes to strategic planning, corporate structuring, taxation, visas, and regulatory compliance. Because of this, every internationalization process is unique and directly influenced by the company’s level of maturity and preparedness.

International expansion can generate financial, strategic, and branding advantages. Crossing borders may lead to increased revenue, access to more competitive markets and stronger currencies, greater scalability, and a stronger corporate reputation. In addition, having an international presence often increases a company’s credibility and perceived value — even within its home market.

The average timeline of the whole process to internationalize can take anywhere from 3 to 5 years.

More than speed, the success of this journey is directly connected to the quality of the planning and the ability to execute each stage strategically and securely.

In practice, many companies are able to establish an international operation within a few months, but bringing that structure to maturity is a much deeper process. Building a presence in another market requires cultural adaptation, commercial validation, network development, operational consistency, and the ability to sustain long-term growth.

If your company is considering international expansion, the first step is understanding your business’s level of readiness and building a plan aligned with your long-term goals. Contact our specialists at Drummond Advisors to learn more about the internationalization process.

Written by Paola Von Atzingen, from the Drummond Advisors team.

4 MIN

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Tax Season 2026 is in full swing, and with it comes increased pressure on individuals, business owners, and companies to ensure accurate, consistent filings in full compliance with the Internal Revenue Service (IRS). With advances in tax automation, data matching, and stricter enforcement, errors that once went unnoticed can now trigger audits, penalties, and significant […]

/ By Marcos Ferreira

With advances in tax automation, data matching, and stricter enforcement, errors that once went unnoticed can now trigger audits, penalties, and significant refund delays.

If you are a foreign individual with U.S. operations, own a U.S. company, or invest in the country, this guide outlines how to avoid the most common mistakes during Tax Season 2026 and protect your tax structure.

Tax Season 2026: What’s at Stake

The U.S. tax system is highly structured, but also complex.

During Tax Season, the IRS cross-checks data from multiple sources:

Employers (Form W-2)
Banks and financial institutions (Form 1099)
Digital platforms and marketplaces
International records (in some cases)

This means any inconsistency can be quickly identified.

Common Tax Season 2026 Mistakes (and How to Avoid Them)

1. Underreporting Income

This is the most common and one of the most serious errors.

It includes:

Freelancers and contractors (1099)
Investment income
Business revenue (LLCs, partnerships)
Global income (for U.S. tax residents)

How to avoid it:
Reconcile all forms received (W-2, 1099, K-1) before filing.

2. Incorrect Income Classification

In the U.S., how income is classified directly impacts taxation.

Common mistakes:

Treating active income as passive
Confusing distributions with salary
Errors in income sourcing (U.S. vs. foreign source)

How to avoid it:
Ensure each type of income is properly categorized under IRS rules.

3. Errors in Business Filings (LLC, C-Corp, S-Corp)

Foreign companies with a U.S. presence often make mistakes such as:

Improper reporting of LLC activities
Ignoring partnership obligations
Misalignment between entity structure and tax filing

How to avoid it:
Ensure your legal structure aligns with your tax treatment and reporting requirements.

4. Failure to Report Foreign Accounts and Assets

Depending on your tax status, you may be required to report:

Foreign bank accounts (FBAR)
Foreign financial assets (FATCA)

Errors here can lead to extremely high penalties.

How to avoid it:
Properly assess your international filing obligations (FBAR, Form 8938, among others).

5. Improper or Poorly Documented Deductions

Deductions are a legitimate opportunity for tax savings, but also a major risk area.

Common issues:

Personal expenses treated as business expenses
Lack of documentation
Excessive deductions inconsistent with income

How to avoid it:
Maintain robust documentation and follow strict eligibility criteria.

6. Missing Deadlines or Ignoring Extensions

Key Tax Season 2026 deadlines:

April 15, 2026: general deadline for individuals
March 15, 2026: partnerships and S-Corps
Extension available until October (Form 4868), but does not extend tax payment

How to avoid it:
Plan ahead and use extensions strategically if needed.

7. Lack of Consistency with Prior Filings

The IRS analyzes patterns over time.

Common red flags:

Sudden income fluctuations
Unexplained changes in assets
Discrepancies between corporate and personal filings

How to avoid it:
Ensure historical consistency and properly document any significant changes.

Filing as a Foreign Individual: Where the Biggest Risks Lie

Non-residents and foreign companies face additional challenges:

Correctly determining Effectively Connected Income (ECI)
Avoiding improper or double taxation
Meeting filing requirements even without physical presence in the U.S.
Understanding applicable tax treaties

Mistakes at this stage can lead to:

Incorrect taxation
Penalties
Future issues with immigration or investments

How to Structure a Secure Tax Filing in the U.S.

Centralize all tax forms
W-2, 1099, K-1, among others
Perform full financial reconciliation
Ensure reported figures reflect actual financial activity
Review your entity structure
Especially if you operate with:

LLCs
Holdings
International structures

Assess international obligations
FBAR, FATCA, and global reporting are critical
Leverage technology and automation
Integrated systems reduce errors and increase efficiency
Work with specialized advisors
Especially for cross-border structures

Global Tax Compliance: The New Standard

Tax Season 2026 reinforces a clear trend:

👉 Tax compliance is no longer local, it is global.

Business owners and investors must ensure alignment between:

U.S. tax filings
Obligations in their home countries
International corporate structures

Without this alignment, the risk of inconsistencies and penalties increases exponentially.

Conclusion

Avoiding errors during Tax Season 2026 in the United States is a matter of precision, strategy, and proactive planning.

With increased IRS enforcement and advanced technology, even small mistakes can have significant consequences.

For individuals and companies with international operations, the complexity is even greater and requires an integrated approach.

Drummond Advisors supports global clients in preparing and reviewing U.S. tax filings, ensuring compliance, tax efficiency, and legal certainty.

If you want to reduce risks and structure your operations strategically, the best time to act is before the filing deadline. Contact us through the available chat or via email at info@drummondadvisors.com.

Written by Marcos Ferreira, Content Analyst at Drummond Advisors

2 MIN

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Recent developments following a decision issued by the Supreme Court of the United States may have significant implications for companies engaged in international trade with the United States. While the Court does not directly order reimbursements, its rulings may invalidate certain tariffs or regulatory measures deemed unlawful. As a result, affected companies may have the […]

/ By Drummond Advisors

Recent developments following a decision issued by the Supreme Court of the United States may have significant implications for companies engaged in international trade with the United States.

While the Court does not directly order reimbursements, its rulings may invalidate certain tariffs or regulatory measures deemed unlawful. As a result, affected companies may have the opportunity to pursue tariff refunds, potentially recovering amounts previously paid.

In response, U.S. Customs and Border Protection (CBP) is expected to implement a system known as the Consolidated Administration and Processing of Entries (CAPE) to handle tariff refund claims.

What does this mean for your business?

Companies operating across borders should take a proactive and structured approach, including:

Reviewing historical tariff payments
Identifying potentially impacted transactions
Assessing eligibility for refund claims
Evaluating broader tax and operational implications

To make sure your company is properly positioned, we recommend the following steps:

Begin compiling a complete list (ideally in CSV format) of entry summaries where IEEPA Chapter 99 HTS numbers were declared, as this information may be required for CAPE filings once the portal becomes available
Ensure your company has an active importer account on the ACE (Automated Commercial Environment) portal and is set up to receive ACH electronic refunds, as any refunds will likely be processed through these channels
Coordinate with legal counsel and/or your customs broker regarding whether to continue filing protests and, where appropriate, test cases, in order to preserve your rights while the system and any appeals process evolve

At Drummond Advisors, we support clients by:

Assessing potential eligibility for tariff refunds
Coordinating with U.S. counsel and trade specialists
Supporting the preparation and filing of claims
Advising on cross-border tax and operational impacts

If your company may be affected or if you would like to better understand how to prepare, our team would be glad to discuss your case.

4 MIN

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Tax Season 2026 marks the period when individuals, businesses, and investors must report to the IRS (Internal Revenue Service) their tax information related to the 2025 calendar year. For those with businesses, investments, or corporate structures in the United States, tracking deadlines and properly complying with tax obligations is essential to avoid penalties, interest, and […]

/ By Marcos Ferreira

In this guide, we outline the main dates of Tax Season 2026, the types of obligations involved, and best practices to keep your company or personal tax situation compliant with the IRS.

When Tax Season 2026 Begins in the United States

Tax Season 2026 officially begins on January 26, 2026, when the IRS starts accepting electronic income tax returns for the 2025 tax year.

Despite this official start date, planning should begin much earlier. Companies and individuals must organize documents, review transactions, and validate information throughout the year to ensure accurate and strategic filing.

Key Dates for Tax Season 2026

January 31, 2026

Deadline to issue Forms W-2 (employees) and most Forms 1099 (independent contractors and miscellaneous income).
Applicable to businesses, employers, and payment platforms.

March 16, 2026

Deadline to file tax returns for:
- Partnerships (Form 1065)
- S Corporations (Form 1120-S)
Also the deadline to request an extension, if needed.

April 15, 2026

The most important date of Tax Season.
Final deadline to file:
- Individual income tax returns (Form 1040)
- C Corporations (Form 1120)
- Trusts and Estates (Form 1041)
Also the deadline to pay any taxes due, even if an extension is requested.
Also the deadline to request an extension, if needed.

October 15, 2026

Final deadline for taxpayers who requested an extension to file their returns.
It is important to note that an extension applies only to filing, not to payment.

Estimated Tax Payments

Taxpayers who do not have sufficient tax withholding must make quarterly estimated tax payments. This commonly applies to business owners, investors, self-employed professionals, and partners in U.S. companies.

Estimated tax payment dates in 2026:

April 15
June 15
September 15
January 15, 2027

Failure to pay or underpay estimated taxes may result in underpayment penalties, even if the annual tax return is filed correctly. The IRS may also disregard the extension made on April 15 and apply penalties of failure to pay and failure to file.

Penalties, Interest, and Compliance Risks

Failure to comply with tax obligations may lead to significant consequences, including:

Late filing penalties
Late payment penalties
Daily interest on outstanding balances
Formal IRS notices
Increased risk of tax audits
Potential impacts on immigration processes or corporate operations

For foreign companies or international structures, the risk of errors is even greater due to the complexity of the rules and the need for proper tax classification.

How to Stay Compliant with the IRS During Tax Season 2026

Some best practices are essential to navigate Tax Season safely:

Advance tax planning
Avoid leaving tax analysis for the first months of the following year. Quarterly reviews help anticipate risks and optimize tax exposure.
Document organization
Keep financial records, contracts, income statements, expense documentation, and international transactions properly organized.
Entity classification awareness
Each business structure in the U.S. has its own filing rules, deadlines, and specific forms.
Specialized support
Working with an advisory firm experienced in U.S. international taxation and tax compliance reduces risks and ensures alignment with IRS requirements.

Conclusion

Tax Season 2026 requires attention, organization, and strategic planning. Meeting deadlines, understanding your obligations, and maintaining compliance with the IRS are not only legal requirements but also key factors for the sustainability and security of operations in the United States.

Drummond Advisors provides comprehensive support to individuals and companies with U.S. tax obligations, offering strategic advisory services, deadline monitoring, and tailored solutions to ensure tax compliance and efficiency.

If you have operations, investments, or a business structure in the United States, contact Drummond Advisors via the website chat or by email at info@drummondadvisors.com and prepare safely for Tax Season 2026.

Written by Marcos Ferreira, Content Analyst at Drummond Advisors

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Why is the Annual Report critical for companies in the U.S.? Keeping a company active and compliant in the United States goes far beyond paying federal taxes. One of the most common, and most costly, mistakes made by foreign-owned companies is missing the deadline for filing the state-required Annual Report. For 2026, Florida and Delaware, […]

/ By Marcos Ferreira

Why is the Annual Report critical for companies in the U.S.?

Keeping a company active and compliant in the United States goes far beyond paying federal taxes. One of the most common, and most costly, mistakes made by foreign-owned companies is missing the deadline for filing the state-required Annual Report.

For 2026, Florida and Delaware, two of the states most commonly used by multinational companies, have already announced their official deadlines. Failure to comply can result in substantial fines, monthly interest charges, and even administrative dissolution of the company, jeopardizing operations, contracts, and corporate reputation.

In this article, we explain who must file, the deadlines in each state, and how to avoid unnecessary penalties.

What is the Annual Report in the U.S.?

The state Annual Report is an annual filing that confirms and updates essential company information with the state where the entity is registered. It should not be confused with federal tax filings submitted to the IRS.

Typically, the report includes:

company address;
information on owners, directors, or managers;
registered agent;
operational status of the entity.

Failure to file the Annual Report may result in the loss of good standing, preventing the company from operating normally, entering into contracts, or obtaining financing.

Annual Report 2026 Deadlines: Florida and Delaware

Florida Annual Report

Companies registered in Florida, including LLCs, corporations, and foreign entities registered in the state, must observe the following:

Deadline: May 1, 2026
Late filing penalty: USD 400
Primary risk: administrative dissolution of the company

Florida adopts a strict policy. After the deadline, the company may be automatically dissolved, requiring an additional—and more expensive—process to be reinstated.

Delaware – LLCs

Delaware is widely used by international companies but also has strict compliance rules:

Deadline: June 1, 2026
Late filing penalty: USD 200
Interest: 1.5% per month on tax and penalty amounts
Primary risk: administrative dissolution

Even inactive companies are still required to comply with this obligation.

Delaware – Corporations

For corporations registered in Delaware, the deadline is even earlier:

Deadline: March 1, 2026
Late filing penalty: USD 200
Interest: 1.5% per month on tax and penalty amounts
Primary risk: administrative dissolution

In addition to the Annual Report, corporations must also pay close attention to the Franchise Tax, which is often associated with this filing.

What happens if the company is administratively dissolved?

Administrative dissolution can have significant consequences, including:

inability to legally operate in the U.S.;
restrictions on opening or maintaining bank accounts;
complications in business immigration processes;
contractual risks with clients and suppliers;
additional costs to reinstate the company.

For foreign-owned companies, this can also impact the relationship with the parent company abroad and international accounting consolidation.

How to prepare and avoid penalties in 2026

Some best practices include:

mapping all entities registered in the U.S. and their respective states;
distinguishing deadlines for LLCs and corporations;
keeping ownership and management information updated throughout the year;
relying on specialized support to monitor state-level compliance;
aligning the Annual Report with global tax and corporate obligations.

Advance planning is the key factor in avoiding unnecessary costs.

State compliance is also strategic

Filing the Florida and Delaware Annual Reports for 2026 is not just a formality, it is a critical pillar for keeping the company active, compliant, and ready to grow in the United States.

Drummond Advisors provides comprehensive support for international companies, handling corporate, accounting, and tax obligations.

If your company is registered in Florida or Delaware, contact our specialists and ensure that all 2026 deadlines are met with confidence and peace of mind.

Written by Marcos Ferreira, Content Analyst at Drummond Advisors

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More transparency in the relationship between taxpayers and the IRS In a move considered historic for tax transparency in the United States, President Donald Trump has signed the IRS Math and Taxpayer Help Act (H.R. 998), legislation that strengthens taxpayer rights and establishes new communication standards between the Internal Revenue Service (IRS) and individuals or […]

/ By Marcos Ferreira

More transparency in the relationship between taxpayers and the IRS

In a move considered historic for tax transparency in the United States, President Donald Trump has signed the IRS Math and Taxpayer Help Act (H.R. 998), legislation that strengthens taxpayer rights and establishes new communication standards between the Internal Revenue Service (IRS) and individuals or businesses subject to “math error” reviews.

The new law requires the IRS to clearly, thoroughly, and verifiably explain any adjustment made to a tax return due to alleged mathematical or clerical errors. For foreign companies — including Brazilian businesses operating in the U.S. — this change has direct implications for how they manage tax risk, respond to IRS notices, and conduct tax compliance processes.

1. What Is the IRS Math and Taxpayer Help Act (H.R. 998)?

The legislation, unanimously approved by the Ways and Means Committee, the House of Representatives, and the U.S. Senate, was introduced by Representatives Randy Feenstra (R-Iowa) and Brad Schneider (D-Illinois).

Its primary goal is to ensure fairer and more transparent treatment of taxpayers when the IRS identifies an alleged mathematical error in an income tax return.

Key points of the law:

The IRS must show all calculations used to correct the return.
The agency must provide a clear, understandable explanation of what the alleged error was and why the amount owed or refunded was changed.
The taxpayer must be informed of their right to dispute the adjustment within a 60-day period.

This legislative update aims to reduce uncertainty, legal ambiguity, and the opacity that has historically accompanied “math error” notices.

2. Why Was This Change Necessary?

According to the Ways and Means Committee, taxpayers were often surprised by IRS notices with little to no explanation about:

why their return had been adjusted,
how the amounts were recalculated,
what steps they needed to take to correct or challenge the adjustment.

For individuals, families, and businesses — particularly those with more complex corporate structures or international operations — this created confusion, uncertainty, and challenges to maintaining full compliance.

By signing the bill, President Trump reinforced a commitment to making public service “more efficient and more accountable to taxpayers.”

3. What Changes in Practice for Foreign Companies in the United States?

For Brazilian businesses with subsidiaries, LLCs, C-Corps, or hybrid structures in the U.S., the new law brings meaningful benefits:

3.1. More Transparency in Audit and Review Processes

IRS notices must now include:

detailed calculations of the alleged error,
a clear explanation for the adjustment,
a comparison between reported and corrected amounts.

3.2. Greater Predictability for Tax Planning

With more complete data, companies can more easily:

identify where inconsistencies occurred,
adjust internal accounting and compliance processes,
communicate with headquarters in Brazil accurately and quickly.

3.3. Improved Tax Risk Management

Documented, transparent corrections reduce exposure to:

improper assessments,
missed deadlines,
incorrect payments,
negative impacts on cash flow.

4. Expanded Rights: Taxpayers Can Now Dispute Notices More Confidently

The 60-day window for contesting an adjustment remains, but taxpayers will now have access to sufficient information to present a well-supported challenge — either directly or through tax advisors.

This update is especially important for foreign businesses, which often face:

differences between U.S. and Brazilian accounting standards,
multiple layers of tax reporting,
technical translation and interpretation challenges.

The new law streamlines communication between companies and the IRS, eliminating ambiguities and strengthening tax governance.

5. What Should Companies Do Now?

To ensure immediate compliance and reduce risk, companies should:

Review internal bookkeeping and reporting processes.
Confirm that internal or outsourced accounting teams are aligned with the new requirements.
Update checklists and workflows for responding to IRS notices.
Maintain well-organized documentation, especially for cross-border transactions.
Work in an integrated manner with U.S. and Brazilian tax teams.

Being proactive is key to avoiding unnecessary disputes and ensuring tax stability throughout 2025 and 2026.

Conclusion: A Significant Step Toward Transparency and Legal Certainty in the U.S.

The enactment of the IRS Math and Taxpayer Help Act represents a major advancement in the relationship between taxpayers and the federal government.
For international companies, the law not only expands rights but also strengthens predictability, simplifies compliance, and reduces risks stemming from unclear IRS notices.

Drummond Advisors is prepared to assist Brazilian and global companies in interpreting and applying these changes efficiently, ensuring full compliance and security in their U.S. tax operations.

For personalized guidance or support with audits, tax planning, and compliance processes, contact our specialists through the available chat or via email at info@drummondadvisors.com.

More information: https://www.congress.gov/bill/119th-congress/house-bill/998

Written by Marcos Ferreira, Content Analyst at Drummond Advisors

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What is OECD Pillar Two OECD Pillar Two is part of the global tax reform under the OECD/G20 Inclusive Framework on BEPS, aimed at ensuring that large multinational enterprise (MNE) groups are subject to a global minimum effective tax rate (ETR) of 15%, regardless of where they operate. The core objective is to reduce incentives […]

/ By Marcos Ferreira

What is OECD Pillar Two

OECD Pillar Two is part of the global tax reform under the OECD/G20 Inclusive Framework on BEPS, aimed at ensuring that large multinational enterprise (MNE) groups are subject to a global minimum effective tax rate (ETR) of 15%, regardless of where they operate. The core objective is to reduce incentives for profit shifting to low-tax jurisdictions and to establish a more level international tax playing field.

Pillar Two introduces a coordinated set of rules, collectively referred to as the Global Anti-Base Erosion (GloBE) Rules, that determine whether an MNE has paid at least the minimum 15% effective tax in each jurisdiction. These include:

Income Inclusion Rule (IIR): Allows the parent entity to collect a “top-up tax” when a subsidiary is taxed below 15%.
Undertaxed Payments Rule (UTPR): Acts as a backstop to the IIR, allocating top-up tax to other jurisdictions when the IIR cannot be applied.
Qualified Domestic Minimum Top-Up Tax (QDMTT): Allows countries to impose their own domestic top-up tax to ensure local profits reach the 15% rate before foreign jurisdictions apply the IIR or UTPR.
Extensive compliance and reporting requirements, including country-by-country calculations of income, taxes, and adjustments.

Pillar Two generally applies to multinational groups with global consolidated revenues of at least EUR 750 million.

Brazil adopted a Qualified Domestic Minimum Top-up Tax (QDMTT) under Law No. 15,079/2024. The QDMTT is imposed as an additional rate of 15% on the Social Contribution on Net Profit (CSLL) and its law aligns closely with the OECD GloBE (Global Anti-Base Erosion) rules. Hence, the company must calculate the GloBE profit and, if the minimum taxation is not met, the additional CSLL rate applies.

A new global landscape for transfer pricing

The implementation of OECD Pillar Two is profoundly transforming the international tax environment. For multinational companies, the impacts go far beyond tax calculations: they affect transfer pricing policies, tax governance, corporate structure, and operational transparency.

While the goal is to curb aggressive tax planning, the rules directly affect transfer pricing because:

– The allocation of profits across jurisdictions now directly affects the Effective Tax Rate (ETR).

– Structures located in low-tax jurisdictions may trigger top-up taxes.

– Local tax incentives may no longer provide the same benefit to multinational groups.

– Substance and economic presence requirements become more decisive.

As a result, transfer pricing policies — traditionally focused on margins and methods — now operate within a new global regulatory framework.

Key Impacts of Pillar Two on Transfer Pricing

1. Review of TP margins and methods

Structures using very low margins for subsidiaries in low-tax countries may create:

ETR below 15 percent,
need for top-up tax payments,
increased exposure to stricter audits.

Companies will need to reassess:

traditional TP methods (CUP, Cost Plus, TNMM),
internal cost-allocation policies,
impacts on jurisdictional profitability.

2. Increased transparency and documentation requirements

Pillar Two reinforces the importance of consistent and standardized reporting, including:

– Country-by-Country Reporting (CbCR),

– financial statements adjusted to GloBE Income,

– mandatory reconciliations between accounting and tax data.

Inconsistencies between TP documentation and GloBE calculations may result in significant risks, penalties, and reclassifications.

3. Need to evaluate tax incentives and special regimes

Tax incentives — such as Special Zones, state tax credits, and innovation regimes — may affect the ETR and trigger top-up tax.

Analysis must consider:

compatibility of local incentives with GloBE rules,
risk of a tax benefit being neutralized by top-up tax,
impact on the company’s global strategy.

4. Restructuring of global value chains and business functions

Compliance with the global minimum tax may require:

– relocation of risk-taking and decision-making functions,

– revision of intercompany agreements,

– changes to IP (intellectual property) ownership location,

– adjustments to principal entity models.

Alignment between function, risk, and economic substance becomes even more critical.

What Global Companies Should Prepare Now

1. Diagnose the global ETR and identify critical jurisdictions

Priority actions include mapping:

ETR by country,
jurisdictions at risk of top-up tax,
impacts on subsidiaries under special tax regimes.

2. Review Transfer Pricing policies

It is essential to review:

applied margins,
economic justification,
available documentation,
impacts on taxable income.

3. Align accounting and tax functions

GloBE calculations require a standardized set of financial data.

Without strong integration between departments, the risk of inconsistencies increases significantly.

4. Strengthen governance for intercompany decisions

With more dynamic audits and simultaneous demands from multiple jurisdictions, companies must enhance:

internal controls,
formal TP policies,
global compliance calendars,
continuous ETR monitoring.

5. Develop long-term strategic planning

Implementation of Pillar Two is not just an operational adjustment — it is a global shift requiring strategic vision.

Critical questions include:

Do our corporate structures still make sense?
Will tax incentives remain effective?
Is the global allocation of functions aligned with the new environment?

How Drummond Advisors Can Support Your Company

Drummond Advisors works alongside multinational groups, offering comprehensive support in:

– Transfer Pricing,

– ETR modeling and diagnostics under Pillar Two,

– adjustments to transfer pricing policies,

– compliance, documentation, and multilateral reporting,

– corporate reorganization and global restructuring,

– tax–accounting integration to meet GloBE requirements.

Our team is prepared to guide your company through adaptation to the new international landscape and ensure compliance, efficiency, and legal security.

Conclusion

The introduction of OECD Pillar Two represents one of the most significant regulatory milestones in international taxation, and its impact on transfer pricing is substantial. Companies that act early – adjusting policies, reviewing structures, and strengthening tax governance – will be better positioned to operate safely in the global environment emerging from 2025 onward.

Written by Marcos Ferreira, Content Analyst at Drummond Advisors, and Hanna Lauar, Associate Attorney at Drummond Advisors

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Global fiscal closing under new rules As the fiscal year draws to a close, multinational companies face a decisive moment: ensuring cross-border tax compliance and preparing reports that meet the requirements of multiple jurisdictions simultaneously.In today’s regulatory environment — marked by the implementation of initiatives such as the OECD Pillar Two, increased tax data integration, […]

/ By Marcos Ferreira

Global fiscal closing under new rules

As the fiscal year draws to a close, multinational companies face a decisive moment: ensuring cross-border tax compliance and preparing reports that meet the requirements of multiple jurisdictions simultaneously.
In today’s regulatory environment — marked by the implementation of initiatives such as the OECD Pillar Two, increased tax data integration, and digital audits — year-end closing is no longer just an accounting process. It has become a strategic stage that defines risk, efficiency, and the credibility of international operations.
In this article, the Drummond Advisors team highlights the main points of attention for globally structured companies and shares best practices for a secure and efficient fiscal year-end closing.

1. Reviewing international structures and double taxation risks

Before closing the books, it is essential to review the company’s legal and operational structure. With the new global minimum tax rules and differing Transfer Pricing interpretations across countries, the risk of double taxation or loss of tax credits has increased.
Best practices include:
• Assessing double taxation treaties and identifying tax relief opportunities;
• Reviewing the allocation of revenues and costs between headquarters and subsidiaries;
• Verifying whether entities in low-tax jurisdictions have sufficient economic substance;
• Updating Transfer Pricing policies according the IRS and the foreign jurisdictions

An annual tax diagnostic helps anticipate adjustments and prevent liabilities that may arise in future audits.

2. Meeting deadlines and local tax obligations

Each jurisdiction follows its own tax calendar. In the United States, for instance, the IRS requires filing of forms such as 5471, 1120-F, and FBAR for foreign companies, while in Brazil, filings such as ECF, ECD, and the CBE (Declaração de Capitais Brasileiros no Exterior) are essential.
For the 2025 year-end, global companies should pay attention to:
• U.S. federal and state obligations (including Sales Tax Nexus and State Returns);
• Reporting for controlled foreign corporations (CFCs) and affiliates;
• Updates to local registrations and licenses;
• Financial statements under IFRS or US GAAP;
• Compliance requirements for special-purpose entities (SPEs) and international holdings.
Centralizing this information within a unified tax governance structure facilitates monitoring and reduces the risk of inconsistencies.

3. Documentation and audit: transparency as a priority

Global pressure for tax transparency and traceability has grown significantly. Organizations such as the OECD and the IRS have intensified data sharing and reporting requirements for international financial flows.
Companies should ensure that:
• Country-by-Country (CbC) Reports are up to date and consistent with financial statements;
• Supporting documentation exists for intercompany transactions;
• Accounting and tax records are aligned with local Accounting and Tax requirements, where the company is based;
• Internal policies include compliance reviews and preventive audits.
A lack of robust documentation can lead to tax reclassifications and significant penalties.

4. Accounting consolidation and data reconciliation

For corporations with multiple subsidiaries across different countries, consolidating financial data can be challenging. Differences in time zones, currencies, and accounting standards require careful reconciliation — especially when reports are used for tax and international audit purposes.
To ensure consistency:
• Standardize chart of accounts across entities;
• Use integrated ERP systems and cloud platforms;
• Automate intercompany balance reconciliations;
• Maintain well-documented and traceable internal controls.
Integration between accounting and tax is the foundation of a successful global closing.

5. Tax planning for 2026: a strategic outlook

Year-end closing is not only the end of a cycle but the beginning of planning for the next one. Global companies should take this opportunity to:
• Identify opportunities for tax efficiency;
• Assess the impact of legislative changes, such as the One Big Beautiful Bill and Revenue Procedure 2025-28
• Review profit repatriation policies;
• Restructure supply chains and intercompany pricing models to match new regulatory realities.
A well-structured annual tax plan strengthens governance and promotes the long-term sustainability of global operations.

Conclusion: preparation is the key to international compliance

Cross-border tax compliance has become a competitive advantage. Companies that plan ahead, maintain strong governance, and follow international accounting and tax standards are better protected against fiscal risks, audits, and penalties.
At Drummond Advisors, our multidisciplinary team — composed of experts in accounting, tax law, and international structuring — supports companies in every aspect of cross-border tax compliance, from planning to year-end closing.
If your company operates globally, now is the time to review your practices and ensure full compliance.

Contact our specialists via the chat or email info@drummondadvisors.com to learn how we can help your organization close the year with confidence and tax efficiency.

Written by Marcos Ferreira, Content Analyst at Drummond Advisors, and Maikon Luiz, USA Coordinator at Drummond Advisors