Several Indirect Tax and Digital Trade Trends Will Shape 2026

The digital economy keeps growing at remarkable speed. Global trade continued to expand in 2024, reaching a record $33 trillion and growing by 3.7%. The expansion was driven primarily by services, which grew by 9% year on year and added roughly $700 billion, nearly 60% of total trade growth. Trade-in goods increased at a more modest pace, rising by just 2%.

By the end of 2023, exports of digitally delivered services had reached $4.25 trillion. That figure represented more than half of all global services exports and almost 14% of world trade. And while goods trade fell that year, digital services kept rising. Strong growth continued in 2024.

This shift is now pushing governments to rethink how they tax cross-border digital activity. As we look at 2026, indirect tax rules are changing fast. The goal is simple: Keep tax bases stable, make sure foreign sellers pay tax where consumers live, and tighten the rules for online platforms.

Tax Bases Expanding

Countries have been trying to close gaps in their tax systems for years, but the rapid move from physical goods to cloud-based services has made the task more urgent. Many tax rules were written for a world where software came in a box and professional services happened in an office. That is no longer the case.

Digital services still escape taxation in some US states. California, Florida, Virginia, and Nevada don’t tax software as a service, cloud services, or digital downloads. But other states are now rewriting their sales tax laws to cover more digital services. In 2025, Washington, Maryland, and Louisiana all moved in this direction.

Maryland’s reform stood out because it introduced a reduced 3% rate for certain digital services that weren’t subject to the state’s general 6% sales tax rate. Commercial use of SaaS is no longer exempt and is now taxed at 3%, while individual-use SaaS continues to be taxed at 6%.

If a SaaS product could fall into both categories, Maryland applies the higher rate. Washington expanded the definition of “retail sale” to include professional digital services such as custom software development, digital advertising, and remote tech support. It also removed an old rule that exempted digital services if they involved “human effort.”

Canada is taking a similar step in 2026. Manitoba is broadening its retail sales tax from Jan. 1 to cover cloud computing in all its forms. That means a Silicon Valley company selling SaaS to a customer in Winnipeg will have to charge 7% retail sales tax. Other Canadian provincesalready tax digital services, and the federal goods and services tax does, too. Manitoba is simply closing a gap that had become hard to justify.

Targeting Digital Sellers

If a business sells digital services across borders, it is likely to have tax obligations in places where its customers live. More than 100 countries already require foreign sellers to register for value-added tax or goods and services tax when they serve local consumers. The aim is to avoid giving foreign companies a tax advantage over domestic providers.

This trend has spread to smaller and emerging economies. Several African countries, along with Laos, introduced these rules in 2024. The Philippines followed in 2025, and more countries will join this year.

Sri Lanka will begin applying its 18% VAT to digital services supplied by foreign sellers to Sri Lankan consumers on April 1, 2026. Mauritius implemented similar rules starting Jan. 1 and now requires require foreign suppliers to register regardless of turnover, and to appoint a local tax representative where their Mauritian digital services turnover exceeds 3 million Mauritian Rupees ($65,000).

Bhutan launched a new goods and services tax system on Jan. 1, replacing its old sales tax regime. The new regime will also apply to foreign digital service providers. Botswana is preparing to impose VAT on remote services this year and also plans to require foreign suppliers to appoint a local representative.

Brazil is approaching the issue differently but with even broader impact. The country is replacing five complex consumption taxes with a dual VAT system. The reform is one of the largest tax overhauls ever attempted in a major economy. It will tax consumption at destination and bring foreign suppliers directly into the tax system.

The federal component of the new VAT, called Contribuição sobre Bens e Serviços, will begin on Jan. 1, 2027. The subnational Imposto sobre Bens e Serviços will follow over several years. But foreign sellers will spend 2026 preparing, because the new rules will expect them to register and comply once the system goes live.

These developments make it clear that indirect tax obligations for foreign digital providers are becoming the global norm, not the exception.

Platforms Targeted

Governments are also shifting attention from individual sellers to the platforms that enable digital sales. When tax rules target platforms, compliance tends to improve because a single entity can collect tax on behalf of thousands of sellers.

Japan moved in this direction in 2025. Starting April 1, large online platforms that facilitate more than 5 billion yen ($32 million) in annual digital sales must collect and remit Japan’s 10% consumption tax on digital services sold to consumers by foreign businesses.

The Philippines introduced similar rules when it imposed VAT obligations on foreign digital providers in June 2025. Online marketplaces must collect tax when they control key parts of the transaction, such as setting terms or handling delivery. Mexico broadened the VAT withholding regime for digital platforms by extending it to business-to-business transactions from Jan. 1.

This shift will continue. Sri Lanka and Bhutan have both said that qualifying marketplaces will be responsible for collecting tax on digital sales made through their platforms. For foreign sellers, this means some compliance tasks will move to the platform level.

Key Takeaways

Digital trade keeps growing, and so does the pressure on governments to update their tax rules. Alignment is now a key theme.

Countries want their tax systems to reflect how people consume digital services today, not how they did a decade ago. That means taxing access to remote software and ensuring foreign sellers are treated the same as domestic ones.

For businesses, the changes bring new responsibilities. Foreign registration will become more common. Cloud services will face more consistent taxation. And platforms will continue to play a larger role in collecting tax at the point of sale.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Aleksandra Bal is global tax technology lead at Stripe and a frequent contributor to tax publications and industry conferences.

Write for Us: Author Guidelines