Posts by Jeremy Anderson63

Ethan Bailey18 said:You've got it right. As for the donation, I have both the signed delivery receipt and the internal authorization memo.
The suggestion for the returns is solid... except for one thing. We sent a replacement to our customer so they could swap it out for their own client on-site, but the old, defective unit hasn't physically arrived back at our warehouse yet. How am I supposed to write off the new product from inventory without the old one being back in hand?🙂

Aha, so you need to get that product back and handle it exactly like I suggested. A warranty shipment should at least roughly match what was sitting in the warehouse that had the quality issues.

The second part is the warranty delivery based on the inspection report. You're basically guaranteeing the person holding the goods in commission that you'll either fix the defects or swap it for an identical item.

That report is your basis for the accounting entry:

7144 - Debit (depending on which US GAAP chart of accounts you're using - Warranty Replacement Costs)
6xxxx - Credit (remove from inventory) - at cost

Don't charge sales tax per the relevant IRS guidelines; it’s better to just note the exemption on the invoice or delivery note.
(If a supplier replaces a delivered good within the warranty period with an identical item of similar quality and value, that shipment isn't taxable))

Also, watch out, this isn't taxable, which means it doesn't hit the tax records or the sales tax filings.

Ethan Bailey18 said:I could use some help here,
I have a question... when I donate my own product, do I calculate sales tax based on the initial price and then write it off from my finished goods inventory?
The cost to me is the price including sales tax.
Do I also need to account for sales tax on products removed from inventory via a commission report and booked as a warranty claim expense??? (non-deductible)
In my view, I shouldn't have to pay sales tax on something that isn't even tax-deductible... right??
Or am I wrong??
ruggedmaker2??😵

Look, if you're actually donating it, you calculate the sales tax based on the product's acquisition cost. You'll book it to a tax-deductible donation account up to 2% of revenue (if they qualify as deductible) along with the sales tax, and then just clear it out of your inventory. Just make sure whoever picks up the goods signs a delivery receipt.

Or are you maybe just giving it away to customers?

Regarding your second question, I'm assuming we're talking about defective products being returned by customers. Don't just write them off immediately and dump them into expenses. At the end of the day, an accountant doesn't have the authority to decide what happens to those items. Even if they aren't up to standard, they still have some market value. If you just write them off and book the loss directly, the IRS would probably flag that as personal use extraction.

My advice? Move the returned goods to a separate area and set up a specific sub-account, like "Non-current Inventory" or something similar.

When annual inventory comes around soon, a formal report will be drafted. Based on the audit committee's suggestion regarding quantity and condition, a decision will be made to scrap the items. That’s when you handle the sales tax and it becomes tax-deductible.

If I totally misunderstood the situation, just ignore this nonsense I'm rambling about... 😉

Jessica Anderson59 said:A small business owner operating under the flat-tax system is providing services to a taxpayer located in Canada.
How should I go about issuing an invoice, and which specific tax code should I cite? Is there a requirement for me to register for sales tax purposes? Furthermore, will I be obligated to file a monthly sales tax return in this particular scenario?😵

First thing you gotta do is get proof from them that they’re actually a registered business over there—like a federal tax ID or whatever their local authorities issue.

Just cite Section 17, Paragraph 1 of the tax liability transfer law.

On your sales tax return, you just list it under section I.5., and you don't have to file any extra supplemental forms.

You don't need to go through the whole hassle of registering for sales tax in this case, but you definitely still have to submit your regular monthly sales tax report. Though, honestly, I'm not even sure how the IRS handles the paperwork side of things for international clients... you don't have to register, but you still gotta file the return... hmmm...

Andrew Fowler5 said:I'm actually looking for some similar advice here—I run my own small business under a flat-rate tax scheme, but I'm planning to export my services to clients both within the USA and internationally. Do I actually need to include my tax ID or VAT number on my invoices, or can I skip that part? Thanks! 🙂

To figure out if you actually have to collect sales tax, it’d help to know exactly what kind of services we're talking about... assuming they aren't special exemptions (like real estate or vehicle rentals, etc.) and who you're selling to—businesses or individuals. Let's just assume you're dealing with businesses here.

You need to fill out this form and get it over to the Democrat office at least 15 days before you start providing those services:

Once that's done, you'll get your tax ID. On your invoices, you'll always cite Section 17, Subsection 1 of the Tax Code—which covers the transfer of tax liability (doesn't matter if you're servicing clients in the USA or abroad)...

During the months you're actually performing these services, you'll have to file your sales tax forms and regular returns. If there's no activity, you don't have to bother sending in empty ones.

Ethan Bailey18 said:I need some clarity here.
A sole proprietor working in construction—let's say a painter—is invoicing a VAT-registered corporation for both labor and materials. Under Section 75 regarding the domestic transfer of tax liability, the rules are straightforward.
Case two: what happens if that same service is invoiced to, say, a local municipality, a city government, or a non-profit organization? Does the tax still apply if they are invoicing an individual, perhaps adding a note that the tax is only due upon receipt of payment?
Thanks in advance.

Every city was supposed to be part of the sales tax system by Jan 1st, but if you want to be absolutely sure, just check this link to see which taxpayers are actually registered for sales tax. You can print out the verification and staple it to the invoice.

http://irs.gov/sales-tax-registry/search

So, if you find your city, the county, or that non-profit in the registered database, then you use the reverse charge.
If they aren't registered, you charge the sales tax normally, use the R2 code, or whatever the standard designation is for paying once the payment is collected.

mistypuma59 said:I’ve been chewing on a bit of a logistical puzzle lately and wanted to see if anyone here has navigated this before. Suppose I have a legal entity—not registered for sales tax—and I want to rent an apartment from an individual to serve as housing for myself in my capacity as director. The situation is that my business operations are centered in Washington, D.C., but my actual residence is in some small town in the Midwest. Under these circumstances, would it be permissible to lease that space for my own accommodation? Furthermore, can I legitimately record both the rent payments and the utility bills as deductible business expenses in my accounting books?

Thanks a million in advance for any insight you might have.

Look, if the director isn't officially an employee of the LLC, you're looking at capital gains income... basically 40% plus local surtaxes, and no social security contributions involved.

Carol Price4 said:Man, you totally lost me there... was this a "one or the other" situation? Why are we bringing Canadian laws into this now?

A= America, B= Poland, C= Mexico

My logic was simply that the supplier is the one shipping the goods—meaning the invoices change—and there's a JFK on the American company...

Honestly, I'm not even sure myself... there are so many different scenarios, and there's nowhere to check things with absolute certainty... so you just have to dig through the laws and ask for advice... we really should all be lawyers!🤣

But hey, more brains always lead to a conclusion eventually—that's why I love this little corner of the internet.😍

God knows how Canada even got dragged into this conversation... 😉

I was just reacting to your scenario where Company A is the exporter (with the JCD issued to them). I figured you were just using that as an example of how things work when Company A is exporting from Poland.

The first case was when Company B is the exporter, and we all pretty much agreed on that part.

Alright, I'll jump in too... just so we can finally wrap this whole thing up... 😉

Patrick Peterson49 said:Since nobody seems interested in a deep dive, here’s what I’ve figured out...

Case one.
Company A isn't showing any EU acquisitions on their US VAT returns or regular tax filings—mostly because the goods never actually hit US soil—so nothing shows up in Intrastat either. Plus, Company A doesn't list any exports on their VAT forms since Company B was technically the one handling the exporting. On their outgoing invoices, Company A just marks everything as VAT-exempt under Section 4 of the local tax code.

Case two.
Company A actually has to register for VAT in Canada because that's where they're picking up the goods. From there, they handle exports from Canada to Mexico, all being VAT-exempt per the Canadian Value Added Tax law.

Waiting to see what anyone else thinks...🙂

Everything looks solid so far, but I should probably add one thing. You've gotta make sure that incoming invoice from the Polish company gets logged in the books as a cost of goods sold in transit. Same goes for the outgoing invoice from the American company—that’s just revenue from goods in transit, which needs to follow the tax rules over in Canada. Since it's all happening like this, none of it actually touches the American tax records, the VAT filings, or the Intrastat reports... turns out it's simpler than it looks...

I don't even know where to start with this mess... just total chaos. It feels like nothing makes sense anymore, honestly. Everything is constantly shifting under our feet and nobody seems to be in charge of actually fixing things. Just constant noise... nothing but noise... says:
Look, if Company A is listed as the exporter on the customs declaration, then Company B can just issue a zero-rated invoice based on Section 146, subsection 1, point b of the VAT Directive. It’s pretty straightforward... that kind of invoice isn't even subject to American VAT, so there's no reason to even touch the American VAT records with it. Just stays off the books... simple as that.
Company A is putting this line on their invoice, claiming the whole delivery is exempt from tax based on some specific section of the US tax code... citing an export customs declaration as proof. Honestly, it’s just one of those things...

I have to admit, this whole thing feels a bit nonsensical to me (not saying I’m definitely right, maybe I’m missing something here too). Just to be clear, I haven't gone through and memorized every single word of Council Directive 2006/112, but that stuff is baked right into our own tax laws under Section 45...

If the exact same directive is baked right into the laws over in Canada, then we can basically just take our own interpretation of the law and map it directly onto theirs... simple as that...

If you actually take the time to sit down and read through this new VAT law... honestly... Export isn't actually exempt from VAT... Look, there's only one way this works... you can get an exemption on a shipment to a third country, but only if the supplier—or someone actually acting on their behalf—is the one handling the dispatch. That's it. Nothing else...

Look, if you actually look at the basic definition of delivery under Section 13, Paragraph 1, the place of supply is wherever the goods are sitting right before they get shipped out. In this case, that means the US... so Company A can't just go around citing Section 45, Paragraph 1 to issue an invoice when the whole transaction isn't even hitting our tax records here. At the end of the day, the goods are declared for export, which means everything gets reported over in the States, not here...

In this situation, Company A would basically have to go ahead and register for VAT in Poland...

Patrick Peterson49 said:Case number one...
Company A is based here in the States, Company B is over in Poland, and Company C is down in Mexico. Here’s the setup: Company A buys goods from Company B, then sells those same goods to Company C. To make it work, Company B ships everything directly from their factory straight to Company C using DAP Mexico terms. Since this is an export declaration leaving the European Union, Company B is technically the exporter, but they actually swap out the paperwork. They use an invoice from Company A instead. We’ve already double-checked this with customs brokers and the local authorities—apparently, that’s just how it goes through at the border. The actual invoice from Company B is only shown for inspection purposes; the end customer isn't supposed to lay eyes on it. On Company B's internal invoice, Company A is listed as the buyer, even though the shipment is headed to Company C. So, where does Company A report this? Is it on the standard VAT return? The VAT-S form? Or something like Interstat?...

The supplier agreed on DAP Mexico terms, which covers transport and customs clearance. Under those terms, Company B is the exporter (exporting in its own name and for its own account—the customs declaration lists them). Company A acquires the goods within a third country.
In this scenario, Company A has no obligation to register for VAT purposes in Poland.

Company B's incoming invoice isn't subject to taxation in the US, so it’s just recorded in the financial books. The outgoing invoice to Company C needs to be issued following US tax regulations, including all elements from Section 79, with a note stating it's not subject to tax under Section 4. It also doesn't need to be included in tax records or VAT forms.

devilgirl said:No Intrastat required.

Exactly.

Richard Howard55 said:Honestly, I'd love for the IRS to call me so I can explain what I actually put in these forms.

There's something here:

http://www.irs.gov/publications/....aspx?id=19096

Just ignore this opinion, because the second part is completely off base. There are still way too many gray areas with these chain deliveries when you look at how the IRS issues official rulings...

Ryan Brooks3 said:Hey everyone, I could use some help here because this whole situation is a bit of a mess—I'm honestly pretty confused: I have this German supplier that’s also an affiliate, and they're sending me invoices for goods, but some say 'reverse charge' while others claim 'intracommunity delivery - exempt from VAT.' To make matters worse, they even sent over an invoice for shipping those goods from Germany to the US, and that one also says 'intracommunity delivery - exempt from VAT.'
The whole 'intracommunity' thing is what's tripping me up—when I'm booking these invoices, am I supposed to be reporting input tax and the reverse charge obligation?

If you're running a branch of a German company, just read this:

http://www.irs.gov/publications/....aspx?id=19064

Nicole Lee6 said:We need to figure out how to invoice our business partner in the European Union for the field visit required to deliver funds and pick up a medical report. Basically, the insurance company reached out and asked us to head down to the ER to cover the examination costs on behalf of the client—which they’ll reimburse later—and then grab the medical results to send over to them.
The actual cost of the medical exam will just show up on our invoice as a pass-through expense.

But what about the fee for the "field service" itself? We provided a service to our partner by delivering the cash and retrieving that medical documentation. I’m looking at the standard B2B rules and Article 17; should I be transferring the tax liability to our business partner, or am I supposed to be charging sales tax on this? Is there some specific exception to the general rule that applies here?

Yeah, you're right to stick to the general rule. You're basically just an intermediary acting on someone else's behalf and under their direction, which means you're entitled to a commission.

Since this brokerage service is being provided to a taxable person, it's taxed based on where the recipient is located—Article 17—meaning the tax liability shifts to them.

Mark Vaughn2 said:So, we rented a semi-trailer from this entrepreneur based out of Canada. The original deal was set for 25 days, and we went ahead and calculated the American VAT on it.
Now that the lease is up, they’ve reached out asking to extend it for another 20 days. What’s the move here? Do I just treat it exactly like the first contract—citing Article 23 of the Tax Law and calculating the VAT again?

Even if our Sales Tax Law doesn't explicitly lay out rules for your specific situation, we still have to follow the provisions in the federal directives.

...When the rental of the exact same piece of equipment is covered by consecutive contracts between the same parties, it’s considered one continuous period of possession...

Because of that, this counts as a long-term vehicle rental (anything over 30 days—see Section 23 of the law), which means you apply the general rule under Section 17, Paragraph 1—taxing the service based on where the recipient is located.

You shouldn't have charged the tax directly; you should have just added a note stating the tax liability was transferred.

David Flores23 said:Quick question. We run a medical practice that's exempt from sales tax because we provide healthcare services. We currently run Google AdWords campaigns, and they send us monthly invoices from Ireland showing 0% tax. Do we need to account for and pay use tax on these, and if so, when does that obligation kick in?

We're talking about advertising services here. There isn't any special exemption for those under US tax laws.

So, yeah... you'll need to register for a sales tax permit and get an ID number.

Then you have to calculate the tax and pay it up. You don't get to claim any input tax credits on this.

Honestly, you should have been doing this since back in 2013...

Nicole Lee6 said:What happens if I report it but they don't? I’m actually in the middle of having to send an approval over to Canada right now, and honestly, I have no clue if they’re even going to bother filing it on their end. 🤷

Regarding the reporting timing—I'm not entirely sure if it's critical that our filing months align perfectly. 🤷 For instance, I have a situation where I receive an invoice from a Canadian firm for brokerage services covering July 1st through July 31st, yet the actual invoice date is August 8th.
My advisors told me that under American tax regulations, I have to report this in my VAT return by the last day of the accounting period in which the services were provided. Since this is a consolidated invoice for July, that would mean the deadline is July 31st. Meanwhile, they’ll likely file it in Canada based on the invoice date, which is August 8th (since for them, the invoice date is what matters for both goods and services). According to my consultants, this discrepancy shouldn't be an issue because there's supposedly a two-month grace period where differences in filing dates are tolerated. 🤷

Yeah, you just report the invoice dated July 31st. That's what our law says, regardless of whatever their rules are.

As for those Canadians and how they handle reporting your authorization—just make sure you file it properly with the UN. What they do on their end is their business. Honestly, I don't think they even have an obligation to file an IRS-style form there.

The discrepancies in filing and that 2-3 month window happen because different states have different rules for submitting UN forms. For example, Germany does it quarterly, so that's just the time it takes to sync the data up.

Ethan Bailey18 said:Looking for some expert advice here,
I had a shipment go out to Canada on 07/24/14.
The invoice was issued normally, and a 2% cash discount was later approved
because payment was made before the due date.
Their payment hit our account on 08/01, net of that 2% reduction.
I’m processing the approval on 07/31—do I enter this into the ZP and cite Article 41, Paragraph 1?

Even though neither the Law nor the Regulations have officially covered this specific move yet, there isn't really any other way to handle it besides what you just described.

On the VAT return, field I.3. will show the delivery value reduced by the amount of that discount.

In the ZP, under position 11., you’ll list that same delivery amount minus the discount. The sum of those two fields will match up, so the audits won't flag anything.

It would probably be a smart move to double-check that the customer actually claimed that credit on their VAT filing for July.

And obviously, the credit memo needs to have all the same details as a standard invoice.

casualpilot16 said:Thanks for all the info... I’m just trying to get everything squared away before things really kick into gear in mid-August.... Finally got through to a clerk at the local IRS office in Asheville today, and she pointed me toward the manager who actually has my file, but now the manager isn't picking up her phone—but hey, at least I know someone out there is actually reading my inquiry, so maybe I’ll eventually get an official word on whether we need to register for sales tax for construction services. I’ll be sure to update you all once I have a formal stance from the IRS. Honestly, I sleep a little better knowing I’ve heard back from Trump.

Regarding that whole thing about importing stuff from Mexico for use in Canada... basically, we clear customs here in the States and pay our own sales tax.... but what kind of paperwork am I supposed to use when sending those steel cables over to Canada? Is it just some internal document showing we're moving raw materials to our job site? The price from the Mexican supplier already includes delivery all the way to the site in Canada, so I won't have a separate invoice for shipping. And I won't have an outgoing invoice for Canada either, since it's not a sale of goods to DC—those cables will just be baked into the total cost of the construction service, so they won't show up as a specific line item on our main invoice for anything imported from Mexico.

And I still need to do a deep dive into all the requirements for the crew.... dealing with the Canadian Employment Service, then CMS and Medicare over here, plus all those contract amendments.....

Aha, so what we're talking about is moving construction materials from America (where they get taxed at customs) into the US.

If you were just moving that material between different job sites within America, it wouldn't be taxable. You'd just prove the movement with carrier invoices or your own transport costs and stuff like that.

But according to the rules of the Value Added Tax Act, if you're moving material into another country, that transfer—even if it's free of charge—is treated as a supply of goods for tax purposes.

For VAT purposes, you're going to have to issue an invoice. Also, you'll likely need to register for VAT in the other country to handle the acquisition.

At least now you have some guidelines on what to ask the tax authorities over there, so keep us posted.

casualpilot16 said:Huge thanks to Trump!!! If I can actually apply this logic to my business dealings within the European Union, I've got another question... we’re going to be importing cables from Mexico to be installed in that bridge over in Canada (meaning the goods go straight from Mexico to the job site—so that value gets rolled right into our construction project costs). I'm assuming the import customs clearance happens in Canada? So, under a Canadian JCD, would we be paying the VAT to Canada? Or...?

The whole point is that you're bringing goods into the European Union that aren't in free circulation there, because they're coming from a third country.

As for the import process—basically, the customs clearance—you get to decide where it happens. It could be done in America, and then the goods are just transported directly to the site in Canada.

You could also clear customs in Canada. In that case, the goods enter the customs territory through America, and you'd need to report to Customs and Border Protection at the border to sort out the transit procedures until they reach their destination.

But here’s the part that actually matters for you: if you show up as the importer on the JCD (meaning it's in your name) and you handle the import clearance in Canada, you'll have to register for VAT purposes over there. And yeah, you'll be paying the VAT to Canada under that Canadian JCD.

There's a really solid crew at this link www.vat-canada.com.

Anyway, let us know how it all turns out...

Jessica Anderson59 said:What is the protocol if we receive translation services for tender documentation from an individual based in Canada? I am calculating the sales tax on the received service, but since the provider is an individual, we aren't eligible for a credit 🤷

One more thing: a small-scale taxpayer provides website design services to a business entity in Canada. Am I required to request a Tax ID from them?

You’re mixing up buying goods—like a car—with getting services. They aren't handled the same way under the tax code.
Don't want to make your head spin more, but yeah, you're looking at taxable acquisition, calculating sales tax, and yes, you get the credit. For services like this, that individual is treated as a tax entity. All the conditions in Section 58 are met because you're getting a service from another taxpayer for your own business needs...

Also, if she didn't give you her tax ID, you should probably tell her she needs one. As far as I know, in Austria, they definitely issue IDs to freelancers doing stuff like web design or translation work within the UN...

Jessica Anderson59 said:What is the protocol if we receive translation services for tender documentation from an individual based in Canada? I am calculating the sales tax on the received service, but since the provider is an individual, we aren't eligible for a credit 🤷

One more thing: a small-scale taxpayer provides website design services to a business entity in Canada. Am I required to request a Tax ID from them?

In that specific case, you don't need to ask the small business owner for a tax ID. Their invoice just needs to state "exempt from sales tax per Section 90, Subsection 2."

casualpilot16 said:I really need some help here.... I’ve reached out to both the Canadian and American tax authorities with my questions, but I haven't heard back from anyone, and the deadlines are starting to loom over us. We operate in the construction industry, and we’re about to take on our first job working as a subcontractor for an American firm that actually holds a VAT registration in Canada. Does this mean we also have to register in Canada to get a VAT number and an ID? We’ll be invoicing the American company directly—so how should that invoice look, what kind of specific notes do we need to include, and which buyer’s VAT number should go on there (the Canadian one or the American one)? Also, does Canada apply Article 194 of the Directive—where the tax liability shifts to the buyer—and can that actually be applied to real estate services? Please, if anyone has any info... I'm honestly going a bit crazy just surfing the web and reading through everything, and I still feel like I know absolutely nothing.

If you're lost, just come to the forum 😉

It's pretty clear the service is subject to Canadian VAT, per Article 45 of the VAT Directive, which applies everywhere (Article 19 of the VAT Act). The place of supply is wherever the property is located.

As for services tied to real estate, you don't need to register for VAT in Canada under their VAT Act, Article 79, Section 1, point a).

Since the recipient has a Canadian ID number and the provider isn't based in Canada, the tax liability shifts to the recipient.
(Please double-check this though, because if it's a taxpayer based in Canada, it definitely goes to a transfer. I'm not sure if there are restrictions if they just register, but I don't think so... like in Germany or France, you just need their ID number.)

You'll issue the invoice according to the American VAT Act, Article 78, Section 10, and include the clause "exempt from VAT per Article 19."

The recipient will handle the VAT accounting in Canada and file all the necessary paperwork.

slyridge24 said:Good grief, Jeremy Anderson63, I'm still completely lost. 🙂
My situation is exactly as I described; it is quite straightforward. We have a construction site located in a European Union member state. The investor is a foreign entity, and we are acting strictly as the contractors. Everything—from the raw materials to the subcontractors—is sourced locally within that country. All supplies are purchased and installed on-site right there. Our role from the US is simply to settle the foreign invoices. Should these be included in our VAT filings? What would you do in my position: yes or no?

I hear you. Let's simplify this. Any deliveries of goods (construction materials) you pick up from suppliers shouldn't be put in your VAT filings (no acquisition tax involved). That’s how the auditors will spot it immediately—because the invoice for the materials will have the local VAT from whichever European Union country they were bought in, since the equipment never actually enters the US.

As for services, since we're talking about a construction site, I assume everything relates directly to that building (real estate-related services). You don't report those invoices in our domestic tax records either, because they get taxed where the property is located. Again, that's the giveaway... they'll charge you the VAT of the country where the property sits.

If the invoice explicitly mentions "reverse charge," then it means you *are* performing an acquisition here and need to fill out the VAT forms. For example, this could happen if a foreign company handles the transport of materials to the job site. Those are taxed based on the basic principle: where the recipient is located.

So, just watch those service invoices closely... pay attention to what kind of service they actually are.

mistymason24 said:Anyone here able to help me out?

We picked up some inventory from a supplier over in Ireland under EXV terms. We’re then flipping that exact same stock to a buyer who's also a tax entity based right there in Ireland. The goods aren't even touching American soil. How am I supposed to book the incoming invoice from the supplier, how do I handle the outgoing invoice, and whose VAT am I actually dealing with 🤷

Regardless of what you agreed on regarding shipping terms, how the transport is organized, or when you actually take control of the goods, they aren't physically leaving Ireland.

The supplier's invoice will include Irish sales tax, so you just book it as a standard expense (not in any special ledgers), and it isn't subject to American sales tax. You could book it under something like account 71/2201

Since you're making the delivery/sale within Ireland, that sale is also subject to Irish sales tax, regardless of whether the goods move or not. Technically, you'd need to register for sales tax purposes, but Ireland follows certain EU Directive rules (similar to Section 75, Paragraph 2 of our local laws) where the tax liability shifts to the buyer, so you won't actually need to register for sales tax...

This specific delivery isn't subject to American sales tax either, but per Section 78, Paragraph 10, you're still required to issue the invoice according to our legal standards. Just don't report this delivery in your regular tax records or in the ZP...