A small business owner here in California is providing roadside towing services. They invoice an agency based in a neighboring state that hired them to handle these interventions. Since it’s a straight B2B transaction, the business owner sends out invoices without sales tax. Throughout July, several calls came in (let's say one on July 2nd, three on July 14th, and another on July 16th). For every single tow, a separate invoice is issued within two days of the service being completed.
At the end of the month, the partner agency bundles all those individual towing invoices from the previous month together and issues a single invoice for a 10% commission based on the gross amount of the services rendered. Each line item on their bill corresponds to its own specific tow—so, one line per intervention. This invoice is dated August 7th, and it seems to me that these folks will include it in their aggregate filing for August (based on the issuance date).
I was under the impression that I should just use the Federal Reserve mid-market exchange rate for August 7th, convert the USD to my local currency, and then report both the tax liability and the input credit in my August sales tax return.
But then, I heard today that I actually have to report the liability and the credit at the moment the services are performed. If that's true, it implies I can't just convert the whole commission invoice at once; instead, I’d have to break it down. I’d have to calculate the portion of the commission related to the July 2nd tow using the exchange rate from July 2nd, the portion for those three calls on July 14th using the rate from July 14th, and so on. Or, perhaps the entire invoice could be converted using the Federal Reserve rate from July 31st, as the final day of the accounting period. Either way, following their logic, I would have to include this in my acquisition filings for July.
Now I’m left wondering about the relationship between the aggregate report they send over (the one where they list how many tax-free invoices were sent to the US via reverse charge) and the acquisition report we file here (which shows how many invoices we received from them for services). Aren't they supposed to be mirror images of each other? If they report it in August and we report it in July, what does that even make us? Honestly, who is making sense of this madness?!?
David Kelly37 said:The IRS told us the exact same thing at their seminar too—if you're dealing with a legal entity, the tax responsibility transfers to them, whether they're in the European Union or out of the country.
David Kelly37 said:The invoice has to be 100% in dollars, and you can't use reverse charge for exports.
Henry Edwards33 said:From what I gather, "reverse charge" can basically apply to any export within the European Union when dealing with a registered taxpayer. It’s just a way of saying the tax liability shifts, even if they should technically cite the specific legal code—but honestly, getting into that level of detail is just splitting hairs 😁
For services, I’ve double-checked everything from professional seminars to calling up consultants directly. Still, I’m going to go over it one more time (maybe two, maybe three) just to be sure. 😁
That was my takeaway from the seminar. So, essentially, if we are providing services between two business taxpayers where one is American and the other is either from the USA or another foreign nation, the American side doesn't charge sales tax on their invoice; instead, they include a clause stating the tax liability has been transferred under Section 17, Paragraph 1.
However, if it involves the delivery of goods, you use the exemption clause under Section 41.
They repeated it to us three times: reverse charge is mandatory only for services and triangular transactions; everything else falls under an exemption.
The whole debate centered on whether invoices for freighting goods intended for export should strictly state "reverse charge" per Section 17, or if they also need to mention the VAT exemption under that specific export provision.
Henry Edwards33 said:At the seminar, they basically admitted this is just a messy transition phase for the income earners, and honestly, the way it was drafted into the tax code is a bit clumsy. You’ve got one group paying sales tax based on when the cash actually hits the register, while everyone else doesn't have to wait for a payment to claim their input tax—they just go by the invoice date.
I’m facing a bit of a dilemma here; -is it legally acceptable for my domestic invoices to list nothing but my Social Security Number -and for my international invoices (specifically B2B transfers) to show only my Tax ID?
Or am I required to include both identification numbers on every single invoice?
I still find myself circling back to what Nicole Lee6 mentioned earlier, and frankly, I can't shake the feeling that we're missing the forest for the trees here. It’s one thing to discuss the theoretical implications of policy, but quite another when you consider how these shifts actually land on the ground. We tend to get caught up in the minutiae—the technicalities of the Sales Tax Law or the granular details of federal oversight—and forget that at the end of the day, this affects real people in cities like Chicago or Houston. It feels like we’re constantly reacting to the latest headline without ever stepping back to look at the structural integrity of the whole system. Is anyone else feeling this sense of repetitive motion? It’s exhausting to watch the same arguments cycle through these forums every single week, only to have them dismissed by those who refuse to engage with the actual substance of the issue. We need more than just surface-level critiques; we need a coherent framework if we're going to make any real progress. kaže: At this seminar we attended, they laid out how things work for businesses when dealing with imported services (B2B). Apparently, you have to report the sales tax liability and claim the input tax credit at the exact same time—everything goes on the same tax return within that same filing period.
So, I’m diving back into the RRIF 7 documents again—because apparently, that’s how I spend my free time now—and I stumbled upon this specific section. It essentially says that this is going to hit both sides of the ledger: we're looking at new burdens for the "income earners," but it’s also going to squeeze the "profit makers," including corporations and small business owners alike. It's just one more layer of complexity being piled onto everyone. Listen, I need to get this off my chest because I see people constantly tripping over the same misunderstanding when it comes to their obligations to the government. There is a fundamental distinction that seems to escape most folks: the moment a tax liability is actually triggered has absolutely nothing to do with whether or not you’ve actually cut a check or settled an invoice. I was reading some comments earlier—and I’m looking at you, gentlepilot45—and it’s clear there's a lot of confusion regarding how the Sales Tax Law operates. People seem to think that if they haven't handed over the cash yet, the debt doesn't technically "exist" in the eyes of the state. That is complete nonsense. The obligation is born the moment the transaction occurs. Once that sale is finalized or that service is rendered, the tax becomes a legal reality. Whether you’re operating on a credit line, waiting for a client to pay an invoice, or just being slow with your bookkeeping, the IRS and the local tax authorities don't care about your cash flow issues. The liability is established by the event itself, not by the movement of money between bank accounts. It’s a matter of legal fact versus accounting convenience. You can't hide behind a pending payment to pretend you don't owe the government. It’s frustrating to see people play these mental gymnastics to avoid acknowledging what they owe, but the law is quite clear on this: the debt is incurred when the deal is struck. Period.However, if you actually bother to look at Article 139, Section 2 of the Sales Tax Law, it’s clear that "income earners" are entitled to... The right to claim a sales tax credit only kicks in at the exact moment the invoice is actually paid to the supplier. It’s a fundamental distinction that seems to trip people up more often than it should. You can't just claim it because you have a piece of paper sitting on your desk; the money has to actually change hands first. Regarding the completed deliveries...🙂
So, what’s the actual fallout here? Now the IRS is going to be looking at cash flow through this ridiculous lens—basically treating it like some "I'll pay you now and settle up later" arrangement. It’s messy. And then there's the issue with sales tax; it won't just be a simple accounting category for corporations and high-earners anymore. We’re looking at a situation where you're forced to report both the liability and the input credits on the exact same sales tax form, especially in those edge cases where the standard cash basis rules don't apply under USA regulations. It's a bureaucratic nightmare waiting to happen.
Does anyone actually have any more information on this? What exactly is going on here?
Patrick Peterson49 said:if you're exporting goods to a non-US country, then you don't use the reverse charge...
ruggedmaker2 said:I’m honestly stuck on whether we need to use "reverse charge" for exports or not. According to Section 79 of the Tax Code: (7) If the recipient of goods or services is responsible for paying the sales tax, the supplier has to include the phrase "tax liability shift" or the English term "reverse charge" on the invoice.
At my company, we don't really deal with exports since we only work with other US states, so I haven't gone down the rabbit hole of researching this further. I'm just praying someone actually bothered to call their consultants at the IRS to get some real answers.
I'll eventually have to comb through the tax code and all those federal regulations again, but up until now, I've mostly just focused on our internal company stuff. Honestly, trying to wrap my head around everything else right now is just way too much.
stormygardener44 said:I just got back from a seminar where they were saying: "you don't need to include the reverse charge on export invoices." (JPMorgan Chase)
I don't handle physical exports, but I do bill transportation services to third countries. At an accounting seminar, they told us to include the exact same notation as if the service were going to another state—specifically, noting the transfer of tax liability under Section 17, Paragraph 1. Since we aren't collecting sales tax ourselves, the note goes on there; whether those people over there end up paying tax or how they handle it with their local authorities isn't our concern.🤷
stormygardener44 said:I’m just looking for some clarity on self-assessing VAT for services where no invoice was issued during the current accounting period. What kind of documentation serves as the basis for this entry if there's no actual bill? Are we just recording the VAT liability without recognizing any input tax right away? When does the input tax actually get recognized—once the invoice arrives? Also, which line on the VAT return does this go on, and does it need to be included in the VAT-S report?
Up until now, I assumed you needed both the service to be completed and the invoice to be issued before you could claim the input tax, but now I'm second-guessing everything...??🤷
That’s a fascinating question! Honestly, reading this just made me realize I’m going to run into this exact same headache myself. We have partners over in Mexico who refuse to issue us an actual invoice for brokerage services. Instead, clients call it "insurance," but then the insurance company sends us out into the field—basically just more towing services. So, they don't want to bill us for the brokerage; they just fax us some notification saying they’ll pay the amount, minus a 10% cut from the net total of the items on that bill. They basically just reduce the net amount and keep that difference as their own little slice of the pie, while paying us our portion of the VAT based on that reduced net. Don't tell me I'm actually going to have to deal with this self-assessment thing? What is this process, really? How is it handled? Has anyone here actually dealt with this before?
Benjamin Palmer80 said:Article 197.1. states that income tax payers are required to account for sales tax by the end of 2014 based on when the compensation is received or collected except for deliveries or acquisitions within the USA and so on... basically, "reverse charge" applies to your transactions within the USA, so you just account for and deduct the sales tax in the same period you issue or receive the invoices!
🙂 So, I’m sitting here reading through RRIF 7 right now, and it says: ...this implies that for "income earners," as well as for corporations and sole proprietors who are "profit makers," the tax liability is triggered regardless of whether the invoice has actually been paid. However, according to Section 139, Subsection 2 of the Value Added Tax Act, "income earners" still maintain the right to claim an input tax credit at the moment they actually pay the supplier's invoice for the goods or services delivered...🙂
So where does that leave us? For these "income earners," we're looking at real cash flow issues (essentially following a "you pay me first, then I reimburse you later" logic); VAT won't just be some theoretical accounting entry like it is for major corporations and "profit makers," where you just report the liability and the credit on the same VAT return in the same window—especially when you're dealing with those specific scenarios where the cash basis doesn't apply regarding the European Union.
I have a quick question for you all: So, I just tried looking up my VAT ID on the official portal to see if they finally processed it since the official paperwork hasn't arrived yet, and lo and behold—it says the VAT ID is valid. But now I'm spiraling over one specific detail. Since I'm operating as a sole proprietorship, the registration shows my legal first and last name (you know, the owner's name as an individual), but there is absolutely no mention of my business name anywhere. Now I’m genuinely worried about whether this is going to confuse my partners when they try to verify my tax status. For example, my actual business name is Auto Bla, but on the official registry, it just lists John Doe. (And yes, there isn't even a middle initial; it just shows a question mark!)?!? 🤔
Should I actually give the IRS a call to discuss the naming convention? Is it possible to append the business name after my legal name, or maybe fix that weird question mark issue? Or am I just supposed to deal with this mess and not ask any questions?
Richard Howard55 said:Regarding this thread, it was already added to the VAT Act (Article 54a), and now it’s back in US Congress because they're adding Article 54.b (due to fiscalization). It defines who doesn't need to issue receipts.
Cash register receipts
Article 54.a
Cash register receipts, tape slips, or payment terminal confirmations must include at least the following data: 1. the number and date of issuance, 2. the name, address, and EIN of the business providing the goods or services, along with the location where the delivery occurred (store number, office, shop, etc.), 3. the quantity and standard trade name of the goods delivered, plus the type and quantity of services performed, 4. the total amount of compensation and tax, broken down by tax rate.
What should I actually list as the service location on a receipt when I'm out in the field issuing an invoice from a tablet via a mobile POS terminal? (And just a side note—I can't quite figure out how to format that specific part in my current setup). Honestly, I don't even see a dedicated field in the software settings to input a specific location. Does anyone have a practical workaround or a clever way to handle this?🤔 Is it actually possible to use the fiscal transaction number for that purpose? Specifically, I'm wondering if using the second digit of the business premises identifier would be sufficient. Is that enough to get the job done?
I’m feeling a bit lost in the weeds with this conversion stuff; everything feels like a total blur right now. "If the elements used to determine the tax base—excluding imported goods—are determined in a foreign currency, the mid-market exchange rate from the Federal Reserve on the date the VAT liability arises shall be used ."
What does that actually mean in practice? For instance, if I have an invoice from an overseas partner who is transferring the tax liability to us, and let's say the invoice is dated July 20th, 2013. When exactly does the VAT liability arise? Which mid-market rate am I supposed to use: the one from July 20th, the one from July 31st, or the one from August 20th when the actual VAT return is due? 🤷
Richard Howard55 said:Article 79 lists everything required for an invoice under the sales tax law. If the law allows it, you can claim the credit. In paragraph 12 of that same article, they added another type of receipt (which the IRS website says also works for credits) called a "simplified invoice." The difference here is that prices are shown inclusive of sales tax (like a price tag in a shop), rather than the "standard" way where you list the item price, then the tax, then the total at the bottom. Now, here is the catch: that "simplified" invoice cannot exceed $233. I have no clue if that's 700.00 including tax or before tax, because the law just says... "for deliveries of goods or services..." (what exactly counts as a delivery in this context? Honestly, I don't feel like digging that up, I'd rather $233 and call it a day). And that’s where this whole wholesale headache starts, since those follow the full requirements for a "proper" invoice. I suspect retailers are being told things have become "complicated," and everyone will just have to figure out their own way to deal with it (probably by praying the software developers come up with something to get us out of this mess). There. I tried to explain. Maybe it helps, maybe not....
Also, could someone explain which boxes on the sales tax form should be used for shipments to the USA (or even other countries), assuming I have proof they are tax-exempt and I still need to account for "domestic" sales tax?
I’ve been chewing on that exact same problem. Based on everything I’ve gathered so far, my take is this: if you don't have proof that the liability is being transferred, you basically treat it like a standard domestic sale. You report it in those specific columns as if you just sold something right here in town and charged the full tax amount. It doesn't really matter if the destination is another state or some foreign country—if you can't prove they're legitimate tax entities, you haven't successfully transferred the tax obligation. Since there's no transfer, you aren't filing an aggregate report for it; you just treat it like any other local invoice where you've collected the tax. At least, that's how I've interpreted the rules.🤷
triangle said:Exactly. As things stand right now, you’re basically stuck with two options: 1. Issue two separate invoices and just cross-reference the same "service intervention." 2. Use software capable of distinguishing tax types at the line-item level, while simultaneously interpreting the Law such that a "0% VAT rate" is actually treated as "no VAT rate being shown." Honestly, I think the legislator missed the mark when they used the word "stated" in this context!
Well, up until now, Synesis has worked by showing the specific tax type for each individual line item. For instance, on an invoice I handled recently, I had two items: one for domestic transport taxed at 25%, and another for international transport using a tariff code—essentially a 0% rate—with a footnote at the bottom stating that item X isn't subject to tax per Section Y. I haven't fully dug into how it will work moving forward. Do you think I could still pull that off on a single invoice, provided the clause at the bottom is worded differently?
ruggedmaker2 said:So, I’m back at it again, digging through paperwork, and I stumbled upon this bit in the RIPUP: When dealing with service recipients from so-called third countries—meaning nations outside the European Union—under the provisions of Article 18, point 3 of Regulation 282/2011, the service provider can assume the recipient based outside the European Union is a taxable person, unless they know otherwise:
a) if the service recipient provides a certificate from the competent tax authority in the country where they are registered for VAT, which is typically issued by that authority when requesting a VAT refund in a European Union member state under Directive 86/560 / EEC (the so-called Thirteenth Directive),
b) when the recipient doesn't have that specific certificate, but the service provider has their VAT identification number or a similar ID assigned in the country where they are based or headquartered—something used to identify business entities—or any other proof of their status as a taxpayer, provided the supplier performs a reasonable check on the accuracy of the info provided, using standard commercial safeguards like identity verification or payment checks.
I think I'll just tell them to follow this bolded part instead. 🤷
We finally handed in our application for a Sales Tax ID last Thursday, and honestly, the clerk at the IRS office just stared at me with this blank look on her face. It was like I was speaking a foreign language; she had absolutely no clue what I was trying to accomplish with that paperwork or even who I was supposed to be submitting it to. So, now we just sit here and wait to see if they actually grant us the number or not—I guess we'll just have to wait and see. 🤷
Raymond Martinez10 said:That’s not even the issue—the form submission window runs from midnight to midnight. Maybe you installed a newer version of java, which is causing the glitch (or maybe you're stuck with an outdated one).
I did a full system refresh and everything, but still nothing works... I tried again at 9:00 this morning and he finally signed it... it looks like even the submission window isn't following the 0:00-24:00 rule anymore 🤷 I thought that was the case too...
Richard Howard55 said:I just copied this directly from Council Regulation (EU) No 282/2011 (which implements Directive 2006/112/EC (18) Properly applying the rules regarding the place of service delivery mostly depends on whether the customer is a tax payer or not, and in what capacity they are acting. To determine if a customer qualifies as a tax payer, the provider must establish what kind of documentation they are required to obtain as proof from their customer.
When those Canadians didn't ask for anything, maybe it was back in 2011 (before March 15th), before this Regulation even existed.
It says here that the provider has to determine what kind of proof they need to get from their customer. I guess we'll just have to wait for the Treasury regulations, since that’s probably where this will actually be settled. At some seminars, they mentioned something about a certificate the buyer has to pull from their own (third) country to prove they're a registered taxpayer there. They put it more elegantly at the seminar: "one must obtain certification from the tax authority of the state where the service recipient is registered as a taxpayer."
The whole "tax authority of the state" bit... I get that, I guess... but everything else is just total gibberish to me.
Anyway, circling back to this, apis, did you manage to figure anything else out? The regulations don't mention a thing, yet at the seminar, they told us to hold off until the formal guidelines are released to settle this...😕 So what am I supposed to do with these clients in Mexico🤷—calculate VAT for them and let them get ripped off? ☕ P.S. But seriously, those Americans didn't ask me for a single thing, even after this regulation was passed, and we were still considered a third country to them.🤷
Look, I was just venting to some colleagues in my industry—we handle both B2B and B2C services—and honestly, nobody has any intention of changing a single thing. They’re going to keep billing everyone exactly the same way they always have, whether it's local clients, people from other countries, or folks within the European Union. Everything stays subject to VAT, and there’s absolutely no plan to implement a reverse charge mechanism for B2B transactions. When I brought this up, they just stared at me like I had two heads...
Anyway, I’ve been sitting here waiting for the official VAT regulations to be released because I assumed they would finally clarify what actually counts as proof that someone is a legitimate tax resident in a non-EU country. But from what I can see, there isn't a single word about it in the regulations. Did I somehow miss a section? RIF No. 7 states: "The fundamental principle of taxing services based on the recipient's tax seat also applies when services are provided to taxpayers located outside the European Union, and regulation 282/2011 specifies when a user located outside the European Union may be considered a taxable person." Can someone please help me out here? Has anyone actually figured out what kind of supporting documentation I need to hold onto to justify a reverse charge for a third-country partner under Article 17, Paragraph 1?
ruggedmaker2 said:This stuff drives me absolutely insane. One article points to this section or that subsection, and by the time I’ve scrolled back and forth trying to find it, I’ve completely forgotten what the hell I was even reading about in the first place. 🙂 It all just blurs together into one giant mess. 😲 I’ve got a seminar this Friday, so I’m just going to write down a list of questions on paper. I'll shove the paper right in their faces the second I walk through the door and make them deal with it. Hopefully, they actually give me some real answers.
Edit: oh yeah, my first shipment headed out to Austria today. Fingers crossed I didn't forget anything.