Talking Expat Taxes #17
Transfer Pricing & Tariffs: 2026 Cross-Border E-Commerce Tax Planning
The 2025 tariff landscape has fundamentally changed how foreign businesses should structure their US operations. In this essential episode, Alex McGowin sits down with Eran Shif, founder of Incodox and former Ernst & Young transfer pricing expert, to unpack the complex intersection of transfer pricing, customs duties, and international tax strategy. If you're a non-US brand selling into the American market, this conversation could save you hundreds of thousands in unnecessary tariff costs while keeping you compliant with both IRS and CBP requirements.
Show Notes
“My biggest exposure will be that the tariff will be applied on the retail price, not on the cost... because that can change the whole thing - whether we make this business even viable or not.”
Takeaways
Tariffs Changed the Game for Disregarded Entities
The simple US LLC disregarded entity model that worked for foreign sellers may now expose you to tariffs on retail prices instead of wholesale costs. A properly structured US C-corporation can provide defensible wholesale pricing for tariff purposes while managing income tax through transfer pricing adjustments.
Transfer Pricing Serves Two Masters
Customs and Border Protection (CBP) evaluates actual invoice prices on specific products, while the IRS looks at profit margins and comparable companies. You need separate but coordinated documentation strategies - volume discount analysis for tariffs and functional risk analysis for income tax - to manage both exposures effectively.
“You could be selling into the US and everything's good, and then all of a sudden you get hit with a 50% tariff that could ruin your business within a couple months.”
Today's Guest
Eran Shif
Eran is an innovative entrepreneur with more than twenty years of comprehensive experience in the fields of transfer pricing and international tax. His expertise is deeply rooted in his previous roles within government, Big Four firms, and tax software enterprises, providing him with a wealth of knowledge and insights.incodox.com
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Welcome to another episode of Talking Expat Taxes. My name's Alex McGowan with McGowan Tax, where we help individuals and small businesses find practical international tax solutions to, to whatever issue and, circumstance they have going on today. I have a very special guest, Eran Shif. You know what, what really drove this conversation.
I'll let him introduce himself in more detail in a second, but. You know, I've been getting a lot of questions around, especially on the inbound side. Non-US people investing into the US. There's always been a standard way of structuring those types of investments, both from a tax perspective, and then of course the transfer pricing comes into that as well.
But tariffs have changed this in a way that now - because of tariffs situations - it's changing the way people, the way we structure things. And that's also affecting the pricing of intercompany transactions. That's where Eran comes in. He and I had a really good conversation the other day about a potential client and, uh, yeah, I was gonna get him to jump on the podcast and talk a little bit about, about transfer pricing, about the structuring and some tariff implications as well.
So, Eran? Yeah. What, tell, give us a little background into what you've been doing, some of your professional background and your, your current business.
Welcome to Talking Expat Taxes w/Eran Shif @ Incodocs
Sure. Uh, thank you so much, Alex. So, I mean, see. PA and, um, and also with, uh, some experience in the tax authority, uh, using Ernst and Young in the international tax and Transfer pricing, team. Also like a few years in a, in a law firm in New York, uh, also doing consulting of international tax and transfer pricing.
A few years ago I had an idea to automate part of the documentation that corporates need to prepare to meet the compliance of transfer pricing. With that idea, I came, I hook up with Avalara, and we built, a software attack, software product that automates, the preparation of transfer pricing, from here and there.
I, uh, uh, left Avalara a couple of years ago and also, and incorporated Incodox, which kinda, kinda use the same kinda like, I would say, universe of helping multinationals. Not only in the compliance part, but also take it kind of like to the strategy, kind of like what we need to do when we just, establishing an entity, establishing a company.
Uh, so kind of like, if you think about like a timeline from day one, we just establishing our US entity and then afterwards also, um, also the compliance and, , yeah. So in, in taking into account also technology, that basically can help to reduce cost, time and errors. Uh, in prepar preparing compliance and strategy.
Transfer Pricing Overview
Yeah. And let, let's talk about that a little bit. I mean, from a transfer pricing perspective, you know, I work with a lot of people with intercompany transactions and sometimes people don't even realize they have an intercompany pricing issue until it's explained to them. But basically, I guess give us just an overview of what transfer pricing is, who it relates to and what the general issue and strategy is around it.
Sure. So really the bottom line is like each tax authority want to make sure they have their own, uh, fair pay, share in the pie, meaning that the profits in each country are what we call arm flings. And, our arms tank. So in order to go to this thing, basically the idea is to have what we said, what we called comparable companies or comparable transactions.
And basically we compare and say, Hey, these are comparable companies to our US entity. They tend to turn between X, Y, Z profit margin, meaning if our US entity will also earn something in that range means that it's like, check the box, we are at arms length. So basically that shift of profits. Um, and so this is one important thing, I would even say like maybe zoom out for a second.
Income Tax vs. Indirect Tax
And in the world of tax, basically we have two categories of tax. We have the income tax. It's basically also related more to transfer pricing and income tax. It's basically revenues minus expenses, profit, taxable income, what we pay by the end of the year, our tax return. We have another category which is called indirect tax, which is more related to the actual transactions.
It's sales tax, VAT and uh, and tariffs. And it's kind of like, and imagine again, I'm a US entity, US subsidiary of a foreign company. We're purchasing some products to resell it. And I think that will be interesting to discuss kind of to see the different ways how the same literally transaction, how it reflected in indirect tax IE tariffs.
And now it's like kinda like what's the aftermath and how it'll look like in the end of the day. In our taxable, in our income tax.
tax side. Yeah. I mean, at the end of the day, it's really valuation at the end of the day, right? I mean, because it, from a transfer pricing perspective, you're looking, or from an income tax perspective, I guess more specifically, the transfer pricing comes in when you have one person or when you have one taxpayer that's in control of two different businesses.
And if those businesses are in different jurisdictions and they're transacting with each other, you have to be doing it at arm's length. And the only way to find arm's length is to value that transaction as it would've happened in the regular market. Two third parties, you can't manufacture a price between two related parties 'cause obviously you would very easily be able to avoid tax.
Right? Set up the Cayman Island Company. Sell at a very high price to the Caveman Island company and then drop the price down and sell to your customers. That would be the move. But we can't do that because of transfer pricing. And on the indirect tax side, it's a different concept, but it's still valuation because the way they come up with things like tariffs and customs duties are based on the value of that product coming in.
But I guess, no, I guess, tell me where I'm wErang there. 'cause I think
E-commerce and Tariff Management
no, I think that's all that, that's the way I think that's, let's use maybe like a use case. So let's say I'm a non-US brand and I am, manufacturing something and I'm selling it into the US now. To begin with, I don't need to have a US entity to sell my products, whatever. Let's say I'm in the UK and sell it into the us, right?
I can use like third parties, Amazon, FedEx, the whole supply chain can be, MA can be managed without having any entity. Entity in the us. But what we see, and I think that kind of like, if you look at the businesses and I'm not talking about like someone amateurs are doing, maybe selling on Amazon, FBA $10,000 a year, but let's really talk about some more established business.
I would say half a million and above that, already it's more established businesses. There are some, and again, not even tax related, a lot of benefits to operate within a US entity, right? For example, for business wise, it's, uh, kind of like you have, like a US fErant US address, kind of like increases trust among US customers.
Uh, another thing, and I always tell it to my non-US, uh, clients that what is the national sport in the us? And it's not baseball or football, but it's taking each other one to court. So another way to manage that exposure is by having a US entity, which kind of like, like a legal buffer because the US customer interact with the US entity, not with the main company, which is outside of the us.
So that's like a huge kind of like really benefit of having a company, having a uh, having a company in the us.
Right.
Lastly, and kinda like we mentioned that before, what happened in the last few months? We had a huge thing of the tariffs and that created uncertainties, among those non-US manufacturers that sells, into the us how to manage it, uh, affect price, cost.
Suddenly, like the competition is, in a different way, reduces profitability significantly. And we found a way. That having a US entity can clearly and above, in addition to those, due to the two benefits, I said before, you can utilize this US entity in order to better manage and reduce the impact of tariffs.
So we cannot avoid tariffs. However, there is, and this is a thing that what we discuss, you're also, it's about how can we have a control over the price that our US entity, entity purchased a product. The products and basically that kind of in that manner we can manage the impact of the tariffs.
yeah. I mean, so I'm, I'm gonna give an example here, I guess related to e-commerce and of course, you know, this concept applies to different types of businesses, not just e-commerce, but over the last several years. Foreign investment into the US through the, in the e-commerce space has been huge.
I do a lot of that type of work, helping non-resident people get LLCs set up, sell through Amazon, you know, do their US taxes, and there's a whole industry out there of people that do just that work and pump out these returns. But the general, I guess the way it has been is the general tax strategy is.
Set up A-U-S-L-L-C. It's gonna be a disregarded entity owned by a non-US person, that disregarded entity. All it's doing is it's not holding inventory, it's using, say, Amazon FBA, whatever it is. And so it may have US sourced income because of the title passage rule. But. In that scenario, the argument is there's no US trader business 'cause there's no physical presence here.
No agency relationship really, because there's no office, no, no people. So that, like, that's a huge business right now in the us And so what I, what I do as a, as an accountant is. I filed the annual 1120 DE with the 54 72 showing the transactions or just, the transactions between the US LLC and the foreign person.
But there's no income or expenses to report in the us. So generally that's a great deal, right? Is foreign person wherever they're from, maybe they're in a non-tax jurisdiction, maybe they're in Costa Rica, where they have a trans, what am I, what's the word? Territorial system so it's not taxable in Costa Rica.
So that's a great deal for these people. But I think the game has changed a little bit. And that's where
So, and remember the, we have those two tax kind of like uh, factors where the indirect and the direct tax, right?
Right, and, and to be fair, and that's where this conversation like started was, I'm not personally, I don't know a whole lot about tariffs. I mean, I read the newspaper, but I'm not a tariff expert. And I mean, you don't claim to be a tariff expert either, but you understand. How the pricing affects it, and I'm starting to, but I think that's where a lot of people are missing out.
You go on, you go online and there's companies out there like Doula and these different places where you can pay a couple hundred bucks and get a 54 72 and an LLC and sell through Amazon. You're good, but you're missing this whole piece of the picture, which is the indirect tax.
I think. I think exactly it's the exposure. So, okay, so I'll do the disregard identity. I'm great with the income tax. You know, it's like typically. Associated with low operation expenses. It's not so, uh, expensive. No tax in the us Everything goes back, to the foreign entity.
However, what's the exposure from the tariffs, the, the tariffs, perspective. And if you are, if I'm an e-commerce seller, non US seller, my biggest exposure will be that the tariff will be applied on the. Retail price, not on the cost for something else, because that can change the whole kind of like the whole thing that's like whether, whether we make this business even viable or not.
And that's the exposure that any e-commerce seller needs to consider. Okay, that's my exposure. How do I manage it? And
Case Study: Canadian Retail Product Tariffs
let's talk just to, to nail down the example. Let's talk about our friend, the guy in Canada who was selling a retail product here in the us. I forget what was he paying on the tariff? On the product he was selling through
So again, so it's, again, so, so this exact, those are the process and basically what he was impacted, I don't remember it, it doesn't matter the retail price, but, and I don't, again, I don't recall by hard the exact, tariff, uh, rate, but he was paying those tariffs on the retail price, whatever the end customer
right. And I think it was 50%. So yeah, he had, he sold, I think he sold wetsuits or something like that. And so like if the wetsuit, yeah, costs a thousand dollars, he's having to pay a 50% or something tariff, and he's eating that because they're using the retail price of that.
Exactly. Exactly. So let's link it to
So we got a great tax answer, right? The income tax, he's not having to pick that income up in the us That's great. But you have a thousand dollars profit crossing the border for tariff purposes.
Exactly. So we define what's the exposure? That's the exposure, what do I need to do in order to reduce that exposure? And what we saw that this recorded entity doesn't really help us. And the reason is that the CBP, I mean the, the tariff, the agency. Can basically, they want to see like a real, look and feel of a real transaction as if it's an unrelated, distributor wholesaler that purchase a company.
Right? So it means that all the, you know, all the risks of a, um, F-O-B-C-I-F, all the stuff that, yeah, we taking title over the inventory when before it enters the us. We want to see repurchase orders from the clients to the entity. We wanna see purchase orders from the US entity to the F foreign entity, look and feel as if it's third party distributor.
And if we don't have this bonta kind of like, feel of, it's a real thing. Basically we provide kind of like a roadmap to the CDP to say, to ignore this. Like, whatever you decide that cost, cost, whatever, and. Imply the tariff on the retail price because it's kind of like a path through entity. We can, we can avoid that and look at the final price of the customers.
so what you're saying is you can, if you have the flow through model, obviously it's gonna benefit you to use cost, the cost or something close to it, as opposed to the retail price when it's coming across the border for the tariff. But you have to be able to prove that. And it'd be interesting to know, and I doubt you know the answer to this, I definitely don't.
But like, how, what would most people be using, you know, in that scenario? Like, are they using cost and just hoping they don't get caught? Are they using value? Are they doing, going
Yeah. That, that's, that's like that, that's the question. That's the
I mean, 'cause there, there was a great article, uh, in the Wall Street Journal, I think it was yesterday, where, I think the headline said something like.
Um, why the tariff impact hasn't, hasn't had as big of an impact on inflation as everybody pro projected. And of course, one reason is just that everybody likes to, to freak out and scare people in the first place. But also one of the reasons they said was that people aren't actually paying the tariff price that they were expecting.
So either they're using. Either they're using different prices or managing that price better. They're going through countries that have better tariffs. So I mean, you are seeing it in real time where people are structuring their transactions to avoid the tariff, and some people are doing it better than others.
And I think that's what this conversation is, is how do we structure it so it's actually supportable and not just putting a number on a piece of paper, and that's where the disregard entity may be, may be a problem.
So someone, someone is paying the question is who, whether it's the end client, the entity, the manufacturer, the, the e-commerce, the eell, but someone is taking kind of like discussed on their, on their behalf or. Or split it somehow to your, and I think that's like really to find like the right kind of like balance, what should be the invoice price.
Intercompany Transactions and Compliance
So yeah, we set up a company, US entity, it's our importer of record. They're per legally or financially invoicing. They're purchasing the product from the. Whatever from the Canadian entity and they're reselling it to, uh, to, to the end customers now. And we have also here, like few options. What should be the price that our US entity will purchase those products from the Canadian entity and also here, look, think about on a scale so we can be like more aggressive, you know, if we are going to use cost, password, the same cost, et cetera.
But I think that this is kinda can be sometimes too aggressive. Because again, CDP will say, I mean,
To me. To me, there's no scenario. To me, there's no scenario where you can justify cost,
It's, it's, it's like too aggressive. It's like, and I think that a best way to be kind of like a little bit one notch above the cost. So we don't have to be, I would say full and have like a full price. Of course not on the other one. We don't wanna be too aggressive on beyond the cost, but if we can find.
Kinda like a cost plus something or a different way. I'll, I'll, I'll tell different way that will be not on the edge, but close to the edge but not on the edge. I think that can kinda like a win-win situation because we are not at cost, we are like, have something of a more reasonable price. But on the other end we are still very far from the retail price, kind of like that, that, that we don't want to be there.
And I think that that will be, can be a smart way, kind of like to manage the price. Now there may, there are some couple of ways how to determine the price. One of them is cost plus, and then basically, okay, so what should be the plus and how come you can, you came up to this plus and come now. We basically are touching down how the CBB also looks at things and basically we wanna show similar products or similar sales, similar invoices to what we did with different entities and.
One of the ways that we found and, and we're using it like more and more now because it makes so much sense when we establish, when our Canadian entity establish a US entity. The US entity is like a wholesaler, so they sell for the whole US market from a separate entity, from the Canadian perspective, this US entity.
I think it will be. It is the largest clients of the Canadian entity We sell to, maybe to Singapore. We sell to a a uk. We also sell to the US a single client in the us, which has happened to be our US entity. So the US entity, kind of like from the Canadian perspective, it's the largest client, right?
Because they can like cover the whole US market. Does it make sense
So you're gonna give a pretty good, you're gonna give a good price to your largest client,
Exactly, so we talking like none, like even setting the same group. Would you give reasonably a good price discount for your biggest client that purchase products x 10, x 11, then your other, your second biggest client?
That's of course, yes. The only question is like to determine how much it is and one of them because, and, and, and it's hard to find real comparables. No, we don't have any other clients that also purchase for a million dollar a year. We have some fewer, fewer, like someone says maybe for 50 K, maybe some of 70 5K.
Yeah, and we provide them them 50% and maybe someone we provide another 60% discount. What we are doing, we are taking those kind of examples and basically using mathematical statistical formula to logically estimate what should be the discount rate for us Companies that, whatever, let's say, sells a million dollar a million dollars a year. And by that kinda like, yeah, we don't have a real comparable Exactly. Clients that also purchase a million dollar a year, but we provide a logical way to have a logical estimation. What should be the price, what should be the discount rate for a large client that, whatever, let's say purchase a million dollar a year, where we, our second largest client only purchased whatever, 50,000 a year.
And we, for them, we provided whatever, 30% discount and we had another client for to whom we sold a hundred thousand a year, and to whom we provided 65% discount. Right? So we're taking those two points and basically, um, extrapolate and kind of like come up with the rational logical rate that can be, um, a executed on or you sensitive.
Yeah, no, that makes sense. I want does, do you know, does the CBP. I mean, do they have a similar like auditing process like the IRS would or who is the actual authority that's auditing that sort of thing?
CBP, so similar, irs, similar ICBP. They have a method similar like the IRS, not exact methods, but they have like certain method to evaluate what should be the price. And again, actually the looking at the invoice, they wanna see similar products or, or. Or, or identical products and if not so
Balancing Risk and Exposure
so you can use the same documentation for income tax as you can for like a comparable analysis. I mean, obviously income tax has very specific rules,
exactly. So it's like, it's like, let, let's look like a fast forward perfect Iran. Okay. We using 80% this country with the US entity. We purchasing the products really cheap, right from, um, uh, for Canada and we're selling into the US. Now all the expenses are what will happen. Like let's do, let's do like a fast forward to towards the end of the year, what happens now, our US entity super profitable, right?
All the income, all revenues from US customers are in the US entity. We purchase a product super cheap because we got a discount of a wholesaler. And yeah, we have some operational expenses, mainly logistic expenses and maybe some minimal kind of like, you know, like, um, admin compliance expenses.
Mm-hmm.
our profit on most of the profits that we derive in the US market is now within the US entity.
Entity. Now, let's go actually now, now like in the income tax. Uh, uh, now we need to file our tax return, like we have a huge profit in the us and here comes the transfer pricing for income tax. And it's a bit different than how CBP looks at at at pricing. CBP looks at the actual invoice, the actual product.
While for transfer pricing income tax perspective, it's a more broader review. And basically we're looking at the functions, risks and assets that each entity employed. Imagine like a table. We have US subsidiary in one end on one side and the other side, the Canadian entity.
Mm-hmm.
And like we ask ourself or the tax authorities of themself, which entity, entity respond, what are the functions, risks and assets in each entity?
And now. Our US entity almost has nothing. We don't have any employees. Maybe we don't maybe even have an office, right? But so most of the functions are in Canada, most of the risks and kinda like also the people that can make decisions over the risk of the business are in Canada, the intellectual property brand name or kind of a knowhow is owned by the foreign entity.
So basically what we have in, if you look at the table with everything almost in the foreign entity, and it's a very limited. Cannot, what we call limited risk entity in the US as a limited risk entity. Basically, it shouldn't have earned too much money, too much profit because you take, you take limited risk.
So what we're doing, we are benchmarking the US entity to other limited risk distributors. And then just like say some, let's say really like about, let's say between. 2% to 5% profit operating profit margin, which is very close to the taxable income. It's like the profit before tax and and interest as a percentage of the revenues.
So whatever we sold in the us, let's say two, 3%, that would be our profitable, almost our taxable income in the us. But before that, we are more, much more profitable that because we purchased, we purchased the product for really cheap and what we are doing or the company's doing. He's doing what we call intercompany balances.
Typically every quarter or before year end intercompany balances to align the profit of the US entity, entity to align with the two or 3% that we determine now those intercompany balances. On what basically they represent all kind of like, let's call it all the functions, the services, everything that the Canadian, Canadian company provided the us, the strategy, the management, the brand, the, the, the strategic, uh, um, I don't know, um, alliances that we have with other partners.
So you have basically, you have the whole village behind you in order to make this sale to the end customer in the us. And basically for that, those, those intercompany transac, those intercompany balances, those intercompany charges, how that be? Now there's someone to say there is no in those intercompany charges, no inventory, no goods are going from Canada or other to us it's in the books, behind the scenes, kind of like that, only to make those adjustments.
So
Hmm.
I it for a second. If you take this A to Z, we purchase the products in a lower price as a wholesaler. Pay the tariffs as a wholesaler by the end of the year, we doing those intercompany adjustments balances, kind of like to align with the functions, risks and assets, same as we have in those comparable companies.
So income tax in the US will be according in the same manner with we do whatever with a two or 3% profit margin, and that's the transfer pricing.
So we could, okay, so they're really two different things. We're coming up with a value of the product for indirect tax purposes, whereas in the US we're coming up with a comparable profit margin. So if you look at the sales line of the tax return, it might not be the same as if you added up all the value of the product coming over from an indirect tax perspective.
And that's okay because you're, they're not, it's not the same calculation.
Exactly. It's not the same perspective. It's like CBP doesn't take risks, uh, and
not gonna ask for your section 4 82 income tax return documentation. They don't care
Exactly.
to know. It could be part of it, but not really.
It's, it's important to say that also it's like two things. First of all, there's never bulletproof. It's like we, we are in the tax world, so nothing is bulletproof and any agent can basically can challenge and decide and no, I don't agree, blah, blah, blah. So it's important to say, I think maybe more kinda like even more mature way to look at it, it's risk management, right?
As an entrepreneur, as a reseller, as an e-commerce, when. You manage a lot of risks. You also manage to dis risk. And one of the, just what we are offering, kind of like kind of the A to Z, it's a great way to manage this exposure by having this strategy and having kind of also the document that supports that, right?
It's not like we decided like that to have a, an intercompany agreement to have like a guy named, guidance member that tell about the transfer pricing for income. Tax to have the calculation, how we came up to the arisal of the invoice, of the wholesaler discount. When you have all those things aligned, kind of like, again, it's never bulletproof.
However, you'll be in a much better, stEranger tax position because you have the documents that you did like in Bon before the time, also prepared
Mm.
That's what make you'll be in a much better, stEranger position if you don't have those, those things.
I mean, my takeaway from this conversation is really that I think there's a way you can have the best of both worlds, right? Like you could, we could set up a disregarded entity in the us in which case the income tax transfer pricing is irrelevant as long as we have a solid argument and a defensible argument that there's no US trader business, but we can still, we can still call it a limited risk distributor for purposes of the indirect tax world
think that the recorded entity, the, the thing that I don't like with the recorded entity is that because it weakens, I think all the, all the thing with the CBP. So kind of like my advice, if I have to, I it is like set up an LLC but as a C corp. Right. Tax as a C Corp or a C corp. I would, I would not. I, I don't like that.
This, I think it's too risky to have a recorded identity.
right? I mean, it takes some of the substance away. You're calling it a limited dis limited
That's like, because
but it's not really doing anything. I, I understand.
going back to the exposure that, to what, the biggest exposure that will be tariff will be imposed on the, on, on, on the consumer side.
And then, and then it's a question of comparing, it's a question of comparing the disregarded entity model to the C corp model. And managing that risk and exposure because like to me, one of the problems I've always had with the disregarded entity model is, is ultimately selling the company. So if people set up these US LLCs and build a business around it, and then they want to sell the stock of that company or whatever the, or the assets.
The way that the us, the US income tax rules work is it's sourced intangible property, which would be the goodwill of this business. Or, you know, the intangible asset of this business is gonna be sourced based on where the product was, was used and created, which it's gonna be hard to argue that wasn't in the us.
So now, if you haven't been establishing a transfer pricing set up with a C corporation all along. It can be tricky to say, okay, in the last 10 years we reported no income in the US, but now we have to come up with a value related to the sale of this business in the us. Whereas if you did the C Corp option, you can kind of set that up on the fErant end and manage that US tax income tax exposure through transfer pricing and this limited risk distributed model from the very beginning.
If I put myself as a entrepreneur now or a seller, uh, in the US I get it. Pros and cons. Uh, you know, corporate versus disregarded identity. I think that one of my key questions will be, and I, I don't know, I don't know this, uh, what's the cost? What's kind of like the, the startup cost to have, uh, disregarded versus, uh, corp, and what are the annual costs that they need to take into account?
Mm-hmm. Yeah.
I think it's a
I mean that,
right? It's like,
for sure. That's part of this analysis, and I think that's what if, if you're talking to an accountant. I, I think that's where people need to be a little bit careful with these online systems that are just like spitting out these disregarded entities and 54 70 twos.
'cause they're giving you no real advice. They're just charging you 500 bucks to get everything set up and, and roll with it. But you don't really know what's going on behind the scenes there if you're really getting the best situation, but you need somebody to show you a real comparison like. You know, this is the cost of operating a C corporation and the potential tax.
This is the cost of operating in the tax of a disregard entity, and then you have to layer in the indirect tax. I mean, it's not, it's not that simple. At the end of the day, you can make it simple and cover your eyes and, and pretend everything's gonna be fine and nobody's gonna look at something. But yeah, do, do you want to cover your eyes or do you want to go, go into it with your eyes open?
You know, that's, I think that's a big part of
So it's like really, it's like really kind of like insurance or, or something else. So kinda like, yeah, there is a cost. I, I guess, again, I don't know, but I think there is more cost to have a C corp versus a,
Yeah, for
entity for sure. We have much more, it's, it's, I don't know for how much there is more cost for that.
But again, what's the different in the cost? Is it like really material, yes or no? And that really depends on the each and each business and each, and
It's gonna depend on the operator, like yeah.
and, and I
states are there and yeah, there's a lot of O options.
A and, and I think that kind of, we kinda mentioned it like before, it's really related, I think to the magnitude of volume that you have sales in the us, right?
So if I'm selling $50,000 a year, $30,000 a year, kind of like I'm still ramping up. I don't know. But I think once it's becoming like a more robust kind of like features of a real business and I'm just like maybe whatever, $300,000 a year or half a million dollars a year. I think kind of like when you make this decision, it makes more sense because your exposures are bigger, right?
You want, like, you will be more, chances will be on the radar. The volumes that you have more exposures to manage cannot yet. The, the difference in the expenses, it's a bit more, uh, expensive to the C corporation. But again, for a company that sells a million dollars a year, maybe additional whatever, $400 a month.
It's not, not the end of the world. Right? Uh, and you compare it versus all the benefits that you have. Exposure reducing the tariff exposure, uh, and kind of like exit strategy or partner strategies that will be in, in, in the future. Uh, I think kind of like that's a decision that everyone, but it makes more sense that kind of to, to tend to the thing once you are a bit, kind of like more of a business, uh, um, in, in, in term, in terms of volume.
Yeah, definitely. Yeah. Well, look, I mean, I think this is a, I think this is a concept that gets overlooked a lot, and I think that there's a big opportunity for people, you know, to manage risk and exposure. And at the, I guess you could look at it either way. You could look at it from the perspective of someone that's taking unnecessary risk, that they're not documenting and supporting with proper transfer pricing and structuring.
But you can also look at it from the perspective of people. Who are just selling things at retail, you know, through the US and getting hammered by tariffs, uh, that don't necessarily have to, you know, so I mean, I think there's opportunity and risk and you're balancing the two and yeah, I think that's the opportunity I.
also about the reader, something also important to mention. So in the US they, we, we, we used to have like a de minis, uh, rule. So values, again, I think under $800 were not under the tariffs. And that changed. So basically, also, like any product today is subject to those tariffs. And, and again, this is why, and this is what we, we, we, both of us kind of like, uh, uh, feeling kind in the last month.
The amount of emails, calls, discussions that we had with, uh, non-US brands that are selling into the us everybody's impacted from that. I think that
it shows, it shows how quickly things can change, and you need to be prepared for that. You know what I mean? You could be selling into the US and everything's good, and then all of a sudden you get hit with a 50% tariff that could ruin your business within a couple months,
No, no, a hundred percent. This is what exactly, this is why we see the
or sooner.
So having, having the structure in place, I mean, yes, it, it, it's managing risk from a, uh, audit perspective, but it's also managing risk from a governmental. Change, I don't know what the word is, but you know, change in
it literally, Alex, it literally saves money, right? Because instead of paying tarot a hundred dollars per unit, you can do it now, let's say whatever, $20 per unit, right? So it's like real cash savings of tariffs. That going, that, that. That will be paid again. So yeah, that's basically,
Well, we'll, we're definitely gonna be, we're gonna be dealing with tariffs for at least a couple more years. No doubt. Trump, Trump, Trump likes that lever that we have on the tariff side.
and, and, and even with the terrorist, something about like any business we don't like as business owners, we don't like uncertainties, right? I'm a business, I'm selling, I want to know the certainty and uncertainties can like disrupt business. And because of this, also, these uncertainties again.
Adding this us sent it. You have at least a control over the actual price that you is, that you're purchasing and the, and the, and the impact. So, and I think
you some control back over just like these uncertain
that's a lot of value. Yeah. A hundred percent. A hundred percent.
Well look, this was awesome. This is a great, a great, uh, great information I think for, to have out there into the world. Um, you know, if, if people need to get in touch with you or if they have questions, what's, what's the best way to reach out to you?
Uh, Googling just Incodox. I guess it'll be, uh
yeah. I'll put the, I'll put your information in the show notes too so people can reach out to you and, um, but yeah. Okay. Well, hey, it was great. Great having you on. Uh, yeah, this was a very interesting conversation. It's a moving target to some extent, but I think the whole point is, you know, be prepared.
Don't
Yeah, a hundred percent.
just assume one way or the other. Get real advice. Be prepared and, yeah.
I think that also last thing I like, just wrap it up like you said. Yeah. So again, I'm putting myself as entrepreneur, someone, a seller that's selling into the US. Because of technology and what also what I also specifically, again, I talk about everybody else, but also with the technologies that I'm using.
We can wrap all those documents that you need and to make it not as expensive as you may think, and honestly, something that can be very, very competitive price. Again, because I'm specific, I'm using this technology that can help produce those documents. In a much more, I would say competitive price.
Yeah. Yeah. No, that makes sense. All right, cool. Well, great talking to you,
thank you so much. It was great talking with
we'll talk to you later. Thanks for coming on.
Alright.