Posts by Brandon Anderson10

Raymond Martinez10 said:The question isn't whether you can reject that excise tax mentioned in Sections 58 through 62—which Section 57.2 points directly toward—it’s about the timing. When exactly does the right to reject it kick in? Is it at the moment the invoice is received, or is it when the bill actually gets paid, like how we've been handling things up until now?
There’s some weight to my assumption here—and honestly, a fair bit of uncertainty too—but it all stems from that one specific sentence in Article 57.1:
The right to claim a VAT credit—input tax deduction—kicks in when certain conditions are met. It’s pretty straightforward, really—though the IRS doesn't play around with these distinctions. You earn the right to deduct that tax once you have a valid invoice in hand and the transaction is officially recorded in your books. It isn't just about spending the money; it's about the documentation. If you don't have the paperwork to prove the business expense, don't even bother trying to claim it. I learned that the hard way back when I was running a small logistics firm in Chicago—one missing receipt from a supplier and suddenly your whole quarterly filing is a mess. Bottom line: keep your records tight and ensure every transaction is legitimate. When does the tax liability actually kick in? — specifically regarding sales tax. It’s one of those things that seems simple until you’re staring at a mountain of paperwork trying to figure out exactly when the obligation triggers. Which one can be rejected?

I honestly have no idea how to interpret this—which is exactly why I joined this forum in the first place.

Oh, I realized later that you were making a distinction between two different types of taxpayers (corporate vs. individual income)!!!!

I fall under that first category, so I stay focused on that and always stick to the date on the received invoice.😉

Raymond Martinez10 said:I wish it worked that way too—really, I do—but I'm not sure if Congress intended for us, as a corporation, to forfeit a tax credit we’re supposed to calculate immediately, while the recipient doesn't even face a payment obligation until they actually settle the bill.
The heading above that specific section reads:
Establishment of Input Tax Credit Rights

True, but Section 57, Subsection 2 clearly lays out exactly when a business can claim those credits and which federal regulations they have to follow.

Honestly, I’m a little lost on what you're even asking here!!

Benjamin Palmer80 said:We had a little discussion at a recent meeting regarding that troublesome "reverse charge" mechanism specifically for goods. Just passing along what we talked about—we haven't reached a final conclusion yet, as we're still waiting on an official response from the IRS.
Here’s their take: That specific term is designed to simplify tax reporting and collection only within the European Union single market and it’s strictly used between member states. It's tied directly to the VAT ID number.
Basically, we can't shift the tax liability to someone when we're exporting goods using customs procedures and an EORI number (so, whether it's Canada or the USA, the VAT ID doesn't apply; you use the EORI because it's an export, even if they look similar). Similarly, with imports from third countries, they can't pass the tax burden onto us because we handle our own tax upon import (nobody transfers it to you; you have to pay it yourself).
Should "reverse charge" be noted for goods delivered within the European Union? That remains a mystery! Since the recipient within the European Union completed a certain acquisition—as proven by delivery notes and invoices—they must file an acquisition report, just as the supplier must file a summary report of deliveries. Somewhere in far-off Brussels, all of that is supposed to be reconciled every month regardless of what anyone wrote on an invoice (yeah, right!) 😁.
Where does the three-way transaction come into play (since all examples involve domestic transactions) if we are dealing with a country outside the European Union? If we're importing into any domestic territory and then clearing the goods within the European Union, we end up back at square one—do we write "reverse charge" for another domestic entity? There is simply no conclusion.

Regarding shifting tax liability, I reckon that note belongs on shipments of goods within the European Union or shipments of goods to another US entity.
For shipments within the US where the recipient handles the tax (domestic transfer of tax liability), it's the same "transfer of tax liability" clause. When assembling or placing goods within the EU, or acquiring goods within the EU, a US entity's invoice must include that clause on their end... because even though we are the tax obligors, under these rules, there's no actual cash transaction involved...

To sum it up: all acquisitions and deliveries within the European Union or other territories, exports, etc., need that clause. Obviously, the law dictates who actually carries the tax burden... For an acquisition of goods here in the US, the foreign entity has to note it for us... for a delivery, we have to note it... for exports, it's the same thing...

The law is clear: if the buyer is responsible for paying the tax on the invoice, you absolutely have to state "transfer of tax liability"... and that should be our guiding principle, period!

But

Basically, if you look through the Treasury Department's guidelines or even your favorite finance mag, you won't find a straight answer on how to tax services when they're shipped from DC to the US. It’s because Article 17 says the tax location is wherever the taxpayer receiving the service is based. Then, Article 20 doesn't say a single thing about the taxing location for a TAXPAYER within the USA... so I guess nobody bothers getting specific since everyone is supposed to just stick to the basics in Article 17. At least, that's my take. I'm heading to another seminar on July 10th, so maybe I'll finally get some real answers there.

One more thing—maybe I’m overthinking this, but I wanted to touch on how shipping works when you're acquiring goods within the USA.

Here’s my take on how the math flows: say a taxpayer in Germany ships some goods to another taxpayer here in the States. They get an invoice for the goods, calculate the sales tax, and report it as both a liability and an input credit on their tax return. On top of that, they have to file the necessary acquisition tax reports with all the specific details included.

Then, for that exact same shipment, they get a bill from a foreign carrier. That’s a separate line item where we look at taxable services and the place of taxation. According to the law, since the service is provided to a domestic taxpayer, the place of taxation is based on the recipient's business headquarters. This means we’d need to calculate the sales tax ourselves and report it on the tax returns and the aggregate filings. In this scenario, a local US carrier would probably just list the tax amount directly on the invoice, but with a foreign one, we have to handle the calculation and reporting on every single filing... And then the IRS just runs checks against whatever database they use?????

Is that basically how the process plays out? 😉

Douglas Nguyen30 said:Reporting acquisitions on the VAT return
When acquiring goods within the European Union, the taxable person reports the assessed VAT on the acquisition on their VAT return, but they also report the right to deduct that same tax in the same filing. This means there is NO physical cash payment required for the VAT.

Example:
A business in the European Union supplies goods to a domestic business for $10,000.00.
The European entity issues an invoice but does not charge VAT—as it is a supply to a US business.
The US business calculates the VAT on the goods purchased from the European entity and simultaneously uses that calculated VAT as an input credit.
Consequently, the US business will not physically pay any VAT on the acquisition of goods from the European supplier.

$10,000.00 x the Federal Reserve exchange rate on the date of acquisition (e.g., 1.25)
x 25%
= $12,500.00 x 25% = $3,125.00 VAT

Accounting entries:
Accounts Payable - Vendor (Credit)
Inventory (Debit)
VAT Payable on Acquisition - Liability (Credit)
Input VAT on Acquisition - Credit (Debit)

Thanks a ton for the reply! That’s exactly what I was thinking. My only minor headache is dealing with shipping services where sometimes the carrier is international and sometimes they're local. Any tips?

Taxable events trigger at the moment of acquiring goods within the USA. The obligation to account for the tax happens when the invoice is issued or when the deadline hits (per standard tax code... basically by the 15th of the following month if no invoice was sent). Long story short, the date on the invoice is king, so you just use the Federal Reserve exchange rate from that day—unless we haven't received the invoice yet, then follow those rules mentioned above.

Question

I’m bringing in some inventory from the European Union, and my colleague in logistics already handled all the customs stuff. My question is about the tax side of things. Since there isn't an actual cash flow involved—where the liability and the credit happen simultaneously on the tax return—and we don't deal with those old JCD forms or VAT on them anymore, I'm stuck. How exactly do you calculate the VAT amount for this type of acquisition? All I have on hand is the invoice from the foreign vendor, the shipping docs, and the CMR. I’ve searched everywhere—the Internal Revenue Code, the regulations, even the IRS website—but I can't find a straight answer anywhere.

Anyone happen to know the drill here?...🤷