Posts by Jeremy Anderson63

Jessica Anderson59 said:I was hoping someone could confirm if I am handling this correctly...

A small business owner—specifically a small taxpayer not currently in the VAT system—has registered for VAT purposes and obtained a VAT ID. They are now supplying goods to a taxable entity in Austria (which I have already verified via FedEx).

The small business owner includes the following clause on the invoice: VAT exempt under Section 41, Paragraph 1, "reverse charge."

I intend to file the tax return by August 20th.

Look, if a small taxpayer is "only" registered for VAT purposes and holds a VAT ID, they still aren't technically considered a full taxpayer. They can't just slap down a tax exemption under Section 41 when shipping goods. Instead, they should be using the clause VAT not charged per Section 90, Paragraph 2 of the Law.

When it comes to delivering or acquiring goods, these guys only grabbed a VAT ID because they hit—or decided to ditch—the threshold, just so they could take on the responsibility of paying the tax themselves...

I read through everything, and I get the gist now, but I still haven't found answers to all my questions 🙂

Jessica Anderson59 said:Thanks, 😉ruggedmaker2
.
I have read through everything, and while things are much clearer now, I still haven't found answers to all my specific questions. 🙂

- Does a vehicle need to satisfy both conditions to be officially classified as "new"?
- If so, does that trigger a taxable acquisition (meaning an obligation to pay and a potential input credit)?
- And what about excise taxes—are those included in the base price?

If anyone has dealt with a similar situation, I would appreciate it if you could share your experience.

- just one condition needs to be met, so in your case, it counts as a new vehicle

Jessica Anderson59 said:Thanks, 😉ruggedmaker2
.
I have read through everything, and while things are much clearer now, I still haven't found answers to all my specific questions. 🙂

- Does a vehicle need to satisfy both conditions to be officially classified as "new"?
- If so, does that trigger a taxable acquisition (meaning an obligation to pay and a potential input credit)?
- And what about excise taxes—are those included in the base price?

If anyone has dealt with a similar situation, I would appreciate it if you could share your experience.

- new vehicles are always taxed in the acquirer's state, regardless of who's selling or buying. You're getting it for your service business, but since you're buying it from an individual, you can't claim a sales tax credit (even though it's for business use where deductions are allowed). Honestly, better to buy from a corporation, at least then you actually get the tax deduction benefit...

Jessica Anderson59 said:Thanks, 😉ruggedmaker2
.
I have read through everything, and while things are much clearer now, I still haven't found answers to all my specific questions. 🙂

- Does a vehicle need to satisfy both conditions to be officially classified as "new"?
- If so, does that trigger a taxable acquisition (meaning an obligation to pay and a potential input credit)?
- And what about excise taxes—are those included in the base price?

If anyone has dealt with a similar situation, I would appreciate it if you could share your experience.

- per Section 41, Paragraph 6, excise tax isn't included in the tax base, just the invoice value which will be converted to USD

slyridge24 said:I’ve been getting conflicting advice on this, so now I’m feeling pretty lost
Does the concept of "use" apply if you purchase goods or services within a European Union member state and then install them into a property located in that same country?
To be clear: those goods or services aren't being imported into the US; they are bought and installed locally. Should these types of invoices be reported as a "use" transaction on the sales tax return? I've consulted several tax professionals, and honestly, nobody seems to have a straight answer.

Section 9 of the Law...

»Acquiring assets within the European Union basically means you're gaining the right to control movable property as an owner. Whether that’s the seller handing it over, the buyer taking possession, or some third party acting on their behalf... it's all about who holds the rights to the goods... Either send it over or just transfer it to the heir... Those assets sitting in a member state that... It’s not even a member state... So, when exactly did they actually start shipping those goods out...?.

The law is crystal clear on this... goods actually have to be physically shipped to another member state before you can even start talking about an acquisition of assets... It’s right there in black and white...

This shipment isn't subject to American sales tax, but you still need to get that invoice logged in the books...

If we're talking about installation services, things change completely. It’s a whole different ballgame because when you're trying to figure out where the service actually takes place, the tax location is what matters... not just where the work is physically happening...

Installation services can sometimes fall under those specific exemptions—you know, the ones tied directly to real estate where you won't get hit with any American sales tax. But honestly, it all comes down to a fundamental principle... It really just depends on what exactly you're dealing with.

Unless we're talking about real estate services, you just fall back on the standard rule. Basically, if you're paying for a service, it’s a taxable acquisition. That means any services coming in from the European Union... you've got to handle the use tax and the input tax, then file it all with the IRS...

Jeremy Anderson63 said:Look, if the client doesn't complain, the government won't notice either. Don't sweat it too much 😉

Just to throw another thing into the mix—if your customer tries to claim a Sales Tax Refund through the IRS system, but you shouldn't have even charged them tax on the original invoice in the first place, they aren't getting that money back. By law, they never should've paid it to begin with...

Nicole Lee6 said:Yeah, so I went ahead and issued an invoice with sales tax included when I really should have used a reverse charge mechanism instead 🙂 and now I'm sitting here wondering if I've accidentally opened a massive can of worms for myself?

Basically, my consultant tried to draw a parallel—he compared vehicle storage to, say, keeping goods in a warehouse or renting out a parking space—and then tied all of that back to Section 19, telling me point-blank that I need to be calculating sales tax. 🤷

I'll shoot an email over to the IRS.

Look, if the client doesn't complain, the government won't notice either. Don't sweat it too much 😉

Nicole Lee6 said:In the meantime (while I was sitting here waiting for a reply), I managed to get some advice from a consultant at the IRS, but they told me this falls under Section 19—meaning it should be treated similarly to, say, warehouse storage services—so I definitely need to charge sales tax. 😲 I went ahead and already issued the invoice including the tax. 🙂 🙂

Is there going to be any fallout from this now?

I don't get it. You issued an invoice with tax, you haven't broken any laws. Though, I gotta say, that interpretation sounds pretty sketchy to me. There’s actually a ruling from the US Supreme Court regarding how inventory storage is handled for tax purposes. If you want, I can send it over, or just post it here if anyone else cares...

Jessica Anderson59 said:I am requesting some assistance here; the complexities regarding sales tax and UN regulations are starting to make my head spin. 😵

We are looking into renting a trailer from an American taxpayer to transport materials. Would this transaction be exempt from sales tax, provided we include the reverse charge provision?

Leasing transport equipment - Section 23, Subsection 1.

If it's for less than 30 days, you get taxed in the state where you actually take possession of the trailer (do it here in the States)
If it's longer than 30 days, then you just follow the standard rule—reverse charge applies to the service recipient.

Nicole Lee6 said:I’m looking for some guidance here. We need to bill a client for "storage fees" (vehicle impoundment/holding) — does this fall under Section 17, where I just transfer the tax liability to the business partner (assuming they provide their US Tax ID), or should I be looking at Section 19 and calculating the sales tax myself?

That falls under the general rule... Section 17, paragraph 1.

Otherwise, if you're stuck wondering if it counts as a real estate service, just remember: the real estate has to be the core of the service. A garage or a parking spot isn't the main event here... it’s a storage service.

It would be a different story if he actually rented a specific garage or a designated spot from you. Then you'd be leasing him part of the property, which makes it a real estate service. But this? Not quite...

northerngull38 said:So, here’s my situation. My company (an American taxpayer) needs to re-bill a freight service. We hired a carrier (also an American taxpayer) to move some goods over to Austria. We’ve already sent the main invoice to our Austrian client for the delivery of those goods, citing the relevant exemption under Section 41, Paragraph 1, Item A of the Sales Tax Law. My big question is this: when I issue the invoice for the shipping costs, should I cite the reverse charge exemption under Section 17, Paragraph 1, Item 1 of the Sales Tax Law and include it in the aggregate report? Or, since my company isn't actually in the transport business and we're basically just passing through a cost—which isn't even really a "service" in practice—should I just issue a standard invoice with American sales tax applied?

The Sales Tax Law doesn't actually recognize this whole "re-invoicing" concept. I’m guessing you got an invoice from the carrier made out to you, but the service was actually done for someone else—specifically that Austrian taxpayer.

According to Section 8, Subsection 4 of the Law, if a taxpayer acts in their own name but performs services on behalf of another party, they are considered to have received and provided those services themselves.

In this situation, since the service was performed for you but ordered for someone else, you basically have to act as if you received the service personally, and then you turned around and provided that exact same service to the company in Austria.

You should be citing Section 17, Subsection 1, or Section 44 of the Directive.

Douglas Nguyen30 said:Thanks, Jeremy Anderson63!!

I have one more question... I acquired some inventory in May, but it's defective and we're shipping it back to the US. We'll be receiving replacement stock in June. In this scenario, do I still need to include those returned items in my Intrastat reporting??
Thanks!

...If you find out the shipment is total garbage and you have to send it all back to the supplier, you just file a return report... that's it....

So, you're logging an outgoing shipment under business type code 21 for returns... and then you've got the incoming stuff marked as code 22 for the replacements. Just making sure everyone is on the same page...

Douglas Nguyen30 said:I have a quick question regarding some timing issues... 🤷 The goods arrived with a shipping manifest from the USA back on May 30th, but the invoice isn't dated until June 2nd—plus, I just received the hard copy in the mail. Should this be reported for Intrastat in May or June??
Thanks, everyone!

For Intrastat, it’s all about when the goods actually move in or out. But for tax liabilities? That kicks in the second the invoice is issued. So, based on that, you're looking at Intrastat in May, and the Sales Tax return in June.

Just so you know, the numbers on an Intrastat report don't necessarily have to match the Sales Tax filings perfectly.

Joshua Kim6 said:We just received an invoice from a vendor based in the Netherlands for a shipment of goods. The inventory isn't actually leaving the US; we're keeping it here and then invoicing our client over in Italy.
I could use some help with the bookkeeping on this. For the vendor's invoice, do I include it in the sales tax return under sections II.7 and III.7? Also, more importantly, how do I handle the invoice we’re sending to the customer in Italy? Since the goods are staying right here in the States, I know I have to charge sales tax on that invoice. But what comes after that?

So basically, your supplier delivered the goods, you take possession, and then you calculate and pay the sales tax. On your tax forms, you'll list that incoming invoice under II.7 and III.7 like you thought. Plus the standard sales tax filing.

As for the second part, per the tax code, the place of delivery is considered domestic, which means you absolutely have to charge sales tax on that invoice. For your own tax records, treat it like any other domestic sale. You'll just list it under II.3 on the tax form... basically as if you sold it to any other business here in the US.

amberdrifter14 said:It seems unlikely we'll see many significant changes here. My only real point of confusion is whether the obligation regarding that 30% penalty is triggered if the headcount exceeds 25 employees at the end of the year, or if it’s calculated on a month-to-month basis?
Because in my case, I might have 24 employees one month, jump to 30 the next, and then drop back down to 22 the following month...

IRS Bulletin 06/2014.

What's the protocol if the employee count "swings" from month to month? Does an employer have to recalculate the disability hiring quota every single month?

The quota for hiring people with disabilities is tracked monthly, using the last day of the month as the reference date.
Basically, an employer needs to meet the required quota through one of the approved methods by the last day of every month. Since every employer already tracks their headcount on a monthly basis anyway, calculating the quota shouldn't be some massive headache for anyone...

Jeffrey Jackson6 said:Hey everyone,
So, I figured I’d jump in here with a bit of a situation... I'm a foreign national (originally from Switzerland) and an artist; basically, I busk on the streets, playing my own songs and singing. I already checked in with the local police about how to get a residency permit (I need to file for temporary stay by May 12th, since that’s when my 90-day limit for busking without a license runs out). Since one of the requirements is having "sufficient means of support," I pretty much have to find a way to officially register my gig... and from what I've gathered, that would mean setting up a small business or a sole proprietorship.
Someone is actually looking into whether a street performer can even be registered as a small business, or if they’d classify me as an entertainer or something else entirely; in the meantime, I wanted to see if anyone here has dealt with this, or if you know any artists who have successfully gone the small business route?
Thanks

Jeffrey Jackson6

Hmm... there’s a specific ruling from the European Union Court of Justice on this topic, so I'm digging into it a bit.

http://europa.eu/eu-law/case-law/index_en.htm

case number: C-16/93

I think the main takeaway is this:

In the mentioned case, the issue was determining who counts as a taxpayer or someone performing a commercial activity. However, it's clear from the ruling that if a service is provided free of charge, or if the payment received isn't directly linked to the service in terms of a tax obligation—meaning there's no set fee or quid pro quo—then it can't be considered a commercial activity, and therefore the person performing those services, basically, cannot be considered a taxpayer .

amberdrifter14 said:Has anyone had a chance to look over the new sales tax regulations? Are there any significant changes worth noting?

Nah, just two sections regarding buying an N1 vehicle under the 8703 tariff code...

Carol Price4 said:Jeremy Anderson63, you're spot on—everything you said is crystal clear. But here's the thing—the service isn't actually happening within the European Union. We have foreigners coming right here to the States, eating, drinking, and hosting their big events, then heading home—all while the invoice gets sent straight to a company over in the EU.

So, the IRS agent is actually telling me I don't even need a VAT number—just a quick note citing Article 90, Section 2 instead of Section 1. Honestly, pretty straightforward!

So, I told my client they should just go ahead and get an EIN—honestly, there's zero downside—and I’ll probably head over to the main office to check in with our tax advisor just to be safe and grab an official opinion...

Honestly, I wouldn't bet my life on what a random clerk says, especially if they haven't even bothered to study the new law...

The bottom line is this: the fundamental rule for taxing services under the VAT Act is the "place of taxation." But that "place" isn't where the actual work happens... it's the taxable location defined by sections 16 through 26 of the Law.

Here's a piece by a tax consultant who's definitely more qualified than any desk clerk. You'll see that the European Union doesn't really care about "small" businesses...

Carol Price4 said:A small business owner is providing services—event planning, specifically—for a client based in the European Union.
So, the service actually happens right here in the States, but the invoice goes abroad...

Does he need a VAT ID?

I’m thinking no—since everything is happening locally, he just needs to add a note:

Not subject to taxation according to Regulations art.90 item 2 of the VAT Act.

There shouldn't be any need to file a VAT return or any special reports, right?

It's a different story when you're exporting services, like web design or whatever, but in this case, the clients are coming here to the US to actually use the service..

Nope, the European Union doesn't recognize your "small business" status under Section 77, subsection 4. Any taxpayer with a headquarters, permanent establishment, residence, or habitual abode in the US who provides services in another European Union member state—where the recipient is also in a member state and obligated to pay VAT under Article 196 of Council 2006/112/EU--must register for VAT purposes. - basically the B2B principle.

So yeah, you have to register for VAT (if you aren't already in the system). It doesn't make you a taxable entity for domestic goods or services, just for acquisitions and supplies within the European Union (you won't get any input tax credits).

If you're already in the VAT system, then you need to request a VAT ID, basically by filling out this form: http://www.irs.gov/PdviEu/...6.2013.%29.pdf

Plus, you still have to submit your VAT returns and summary reports.

Carol Price4 said:A small business owner is providing services—event planning, specifically—for a client based in the European Union.
So, the service actually happens right here in the States, but the invoice goes abroad...

Does he need a VAT ID?

I’m thinking no—since everything is happening locally, he just needs to add a note:

Not subject to taxation according to Regulations art.90 item 2 of the VAT Act.

There shouldn't be any need to file a VAT return or any special reports, right?

It's a different story when you're exporting services, like web design or whatever, but in this case, the clients are coming here to the US to actually use the service..

What matters here is who you're providing the service to—individuals or legal entities. Here's what the IRS says:

The question is: Our small taxpayer (a simplified filer without a VAT ID), whose business involves computer programming, web portals, and other IT-related services, designs websites and performs other electronic services for taxpayers in the European Union.

The small taxpayer needs to request a VAT ID from the competent IRS, and on the invoice for services rendered to taxpayers from other member states, they won't charge VAT, but will instead include a note stating that the tax liability is transferred based on Article 17, subsection 1 of the VAT Act.

The small taxpayer reports the completed services in the summary report and the VAT return for the accounting period in which the services were performed.

If an American small taxpayer provides services to citizens in other member states, they won't charge American VAT, nor are they required to register in those other member states for those services.

Regarding this answer from July 24, 2013, we'll clarify further: Small taxpayers, in cases where they provide services to citizens in another member state, should contact the IRS of that member state to find out if they need to register in any specific member state or if there are certain tax obligations for them.

Melissa Hill said:I think I might need a little bit of help here... We just finished an asset acquisition from a supplier over in Italy, and I'm getting a bit turned around with the paperwork... The invoice date is November 28th, but we didn't actually take possession of the goods or have them delivered until December... So, looking at the books, which tax period should I be reporting the VAT in?

For the November filing—which is due by December 20th—per Section 31, Subsection 2 of the Tax Code... the obligation to account for VAT on intra-European Union acquisitions kicks in right when the invoice is issued or once the deadline under Section 78, Subsection 4 of the Code expires if no invoice has been sent yet.

Jessica Anderson59 said:Uhhhh...😵😵...thanks.

I have one more question. We are considering sending a few complimentary product samples to our partners within the European Union. How should this be handled and recorded regarding new VAT requirements?

Alright, check out this specific legal provision...

...Look, let me break this down because people always get tripped up on the tax side of things... providing free samples to customers or potential clients isn't considered a taxable supply of goods, provided you aren't just handing them out like candy every single day. It’s fine if it's done in reasonable amounts and doesn't happen constantly to the same people. Same goes for those little promotional gifts you give out during normal business operations. As long as they're small-value items and given sporadically, you're in the clear. When we talk about "small-value gifts," we're looking at... Whose value isn't higher than... $53.

So, if the value of an individual item is less than... $53 It doesn't even count as a delivery, so you don't have to worry about charging any VAT. You can just note on the invoice that it's VAT-exempt under Section 7, Subsection 4 of the tax code...

Jessica Anderson59 said:I would appreciate it if someone could point me toward the specific article stating that a "small" taxpayer isn't required to account for Sales Tax when purchasing goods from the European Union. I simply cannot seem to locate it 🤷

It’s not laid out in one simple sentence... you basically have to connect three different sections of the tax code to make sense of it.

Look at Section 4. paragraph 1, item 2a + section 5. paragraph 1, subsection b + section 5. paragraph 2, subsection a