Indian founders face a dual risk from navigating 13,000 U.S. tax jurisdictions and distinguishing between federal tariff rules and state-level sales tax obligations, creating a compliance environment that is easy to misinterpret
Dulles Krishnan of Avalara shares how early automation simplifies compliance, transforming it from a growth risk into a predictable, routine operational task
He also talks about how founders must treat compliance as a strategic asset, focusing on visibility, classification, and integration from the first sale to secure clean records to accelerate investor and acquisition discussions
The U.S. market offers significant expansion potential, but for Indian founders, scaling requires navigating a complex layer of tax and customs requirements. Managing more than 13,000 U.S. sales and use tax jurisdictions while also differentiating federal tariff rules from state sales tax obligations creates a compliance environment that is easy to misinterpret. These gaps often surface during investor due diligence, where operational discipline and regulatory readiness are closely evaluated.
To help founders approach U.S. expansion with structure and clarity, we engaged in an exclusive conversation with Dulles Krishnan, Vice President, Go-to-Market, Avalara – India and APAC.
Krishnan emphasizes that early automation is central to building a scalable foundation. He explains the distinctions between the two tax systems and highlights the importance of monitoring sales thresholds (Economic Nexus) and ensuring accurate product classification (HS Codes) from the very first transaction. According to him, embedding compliance into routine operations enables founders to reduce exposure, maintain governance standards, and focus on disciplined, sustainable growth.
Here are edited excerpts from the interaction….
Q1. Indian startups are entering the US market faster than ever. What is driving this expansion?
Dulles Krishnan: Two shifts—rising founder confidence and ready infrastructure. SaaS founders see the US as the largest and the most sophisticated software market. D2C brands see a mature ecommerce ecosystem base that values quality and transparency.
The infrastructure is in place – cross-border payments, reliable fulfilment, and digital selling platforms make landing the first customer easier. But the real work begins after the first sale: companies must manage tax, logistics, and pricing with precision. Founders are realising that scale isn’t just about acquisition, it’s about sustaining profitable growth.
Q2: What makes US tax compliance so complex for Indian startups, and what immediately triggers a tax obligation?
Dulles Krishnan: U.S. tax compliance is challenging because there is no single, centralised tax system. Companies must navigate more than 13,000 jurisdictions, and each of the 50 states independently defines its own sales tax rules, thresholds, and taxability criteria. As a result, similar transactions can be treated differently depending on where the customer is located.
Tax obligations for Indian companies arise through two primary pathways, depending on the business model: For SaaS and digital services companies, liability is driven by economic nexus. In most U.S. states, a company must register and begin collecting sales tax once it exceeds $100,000 in annual sales into that state. This requirement can be triggered entirely through online transactions, even without any U.S. office, employees, or physical presence. Because each state defines the taxability of digital services differently, monitoring classification and thresholds is essential.
2. Direct-to-Consumer (D2C) Exporters
These federal and state systems operate independently, and misinterpreting one for the other is a common risk for first-time exporters.
Avalara helps companies manage this multi-layered environment by automating tax determination, registration workflows, calculation, and multi-jurisdiction filing, enabling founders to maintain compliance as their U.S. presence expands.
Q3. What are the most common mistakes Indian startups make once they start selling to US customers?
Dulles Krishnan: The first mistake is delaying sales tax registration. Many founders believe they must set up a U.S. entity before registering, but most states trigger the obligation based on sales thresholds, not corporate structure.
The second is misclassifying products or services. Incorrect HS codes can change duty treatment and delay shipments. For SaaS companies, inaccurate classification of digital services can lead to incorrect tax collection because each state defines taxability differently.
The third is relying too heavily on payment processors or marketplaces. These platforms may calculate tax at checkout, but they do not manage registration, filing or remittance for the seller. Marketplace facilitator laws require large platforms to collect and remit tax on marketplace transactions, yet sellers must still maintain accurate records and comply with filing rules. The responsibility for compliance remains with the business.
Q4. How does weak compliance planning affect pricing and competitiveness?
Dulles Krishnan: Weak compliance planning creates avoidable costs and uncertainty. Missed filings, incorrect duty treatment or late registrations can lead to penalties or cash flow disruption, which makes it harder for founders to maintain consistent pricing.
U.S. buyers expect clarity on landed costs and tax documentation. Companies that provide accurate estimates and clean records build trust faster and face fewer questions during procurement, onboarding or partner negotiations.
Handled correctly, compliance supports stable pricing, predictable operations and stronger commercial credibility. It is part of brand reputation and a key operational lever, not just a finance task.
Q5. How can small or mid-size teams manage compliance without large finance departments?
Dulles Krishnan: Automation is the most practical approach for emerging companies with light operational structures. Modern software integrates with billing and ecommerce systems to calculate tax or duty on each transaction, track when state thresholds are reached and prepare filings. This reduces manual workload and lowers the risk of missed obligations.
AI strengthens this process by reviewing transaction patterns and highlighting areas where classification or reporting may need attention. This gives founders early visibility into potential issues rather than discovering them after a notice.
For exporters, automation helps maintain accurate HS code alignment. For SaaS companies, it keeps recurring revenue and tax data consistent across states. The result is a controlled and efficient compliance process that these companies can manage as part of routine operations.
Q6. When should founders begin planning for compliance, and what should they focus on first?
Dulles Krishnan: From the first invoice onward, state thresholds begin to accrue. Early registration and automated reporting give a clear view of exposure from the start.
Focus on three fundamentals. First, visibility: know where sales are happening and which states are approaching thresholds. Second, classification: keep product and service data accurate for duty and tax. Third, integration: connect compliance systems to your accounting and analytics platforms so filings are based on consistent data. Early discipline prevents costly corrections and signals credibility to investors and partners.
Q7. How does compliance affect other parts of the business beyond finance?
Dulles Krishnan: Compliance data influences pricing, logistics and sales planning. Accurate tax and duty calculations help set price points, determine warehouse locations and inform contract terms. When all teams rely on the same information, forecasts improve and execution becomes more consistent. Treating compliance as a shared responsibility strengthens governance and operational discipline across the organisation.
For exporters, AI tools can model landed costs under updated duty rules. For SaaS companies, they help project how growth across states may affect nexus exposure. In both cases, compliance insights become practical inputs for strategic decision-making rather than reactive fixes.
Q8: What is the current state of US compliance readiness among Indian startups, and what is your top advice for founders preparing for the US market?
Dulles Krishnan: Preparedness among Indian startups currently varies. While well-funded, scaled companies often invest in compliance systems as they scale , growth-stage teams typically build the function only after revenue picks up. The positive shift is that founders now recognise compliance as a part of their strategy, not something to be delegated later. This awareness is reinforced by investor scrutiny, as due diligence now includes checks on US tax records, making clean records essential for speeding up investment and acquisition discussions.