Posts by Jessica Doyle2

Brian Kern70 said:I’m looking for some clarity on transfers/transportation:

Bus Transfers:

1. A transfer performed within the US is billed at the standard 25% rate;
2. A transfer from the US to the border near Mostar is tax-free once you cross that line;
3. For a transfer going all the way to Berlin—it's 25% in the US, but once you cross the border, you have to follow their local rates, which might require registering your business in those countries;
Can I dodge Option 3 by outsourcing the transfer to another carrier and just billing a commission? Basically, acting as an agent for someone else's account? Or if I handle everything under my own name and the carrier just re-bills me with different rates depending on the country, am I still stuck having to register in every single European Union country?
Does all of this apply to both B2B and B2C?

Sea Transfers from the US to somewhere like Venice? Up until now, taxes applied within the US, but it was tax-free in international waters. Is this transfer tax-free now, or what?

Thanks!

Passenger transport services are an exception to the standard B2B principle and are taxed based on where the transport actually takes place, proportional to the distance traveled. This rule regarding the place of taxation remains identical regardless of whether the service is provided to a business customer—meaning a VAT registrant—or to a private individual who is not a business owner.
1) Correct.
2) It is correct that up to the border, the service is subject to US Sales Tax; this portion through Canada should be exempt (though I am unsure how that would be treated—perhaps as an export delivery??)
3) This transport service is carried out across segments of a route that pass through several European Union member states.
The place of supply for transport services is where the transport occurs, proportional to the distances covered.
The transport moves through segments in the US, Canada, Austria, and Germany, and each of these nations has the right to collect Sales Tax on the transport fee proportional to the segment of the trip within their borders.
The price of the ticket paid by the passenger essentially includes US, Canadian, Austrian, and German Sales Tax for the transport service, allocated to the specific segment of the journey in each respective country.
Countries that have established a system for collecting Sales Tax on international road passenger transport services do so by requiring foreign carriers performing transport on a segment within their territory to register as taxpayers with a specific IRS designated for such taxpayers.
They then pay the tax for the segment in that country, just as local taxpayers based in that country would.
They file tax returns and maintain the right to deduct input tax related to the costs of performing transport services within that country (for example, input tax on fuel, vehicle washing, repairs, parking, etc.).

Regarding sub-invoicing, I don't believe you can bypass the rule, because it doesn't matter who was driving; what matters is *what* was being transported—in this case, passengers in road transport (and the law defines this quite clearly).

4) International passenger transport by sea is exempt from Sales Tax under Section 43, Paragraph 2 of the Value Added Tax law.

Zachary White17 said:I wonder if the service amount from a USA carrier counts toward both tax liability and input tax simultaneously, or if it just hits the liability side. In other words, are we actually exempt from Sales Tax on services provided by USA carriers?

Also, what exactly does "Value of goods delivered under procedures 42 and 63" mean?

No, absolutely not—there is no such thing as a VAT exemption here; there is only the shifting of the tax obligation, otherwise known as the famous "reverse charge" mechanism.
When an EU carrier (say, one coming from Italy or Germany...) provides a transport service to an American legal entity, they don't just skip the tax; they actually add the local 25% tax rate onto the base amount of the invoice received.

As for your second question regarding the import of goods (which would be VAT-exempt) from non-EU countries into the
United States if those goods are intended for another member state (the so-called Procedure 42), the rules are quite strict. Such goods must be shipped to that other
member state immediately following customs clearance, and the importer is required to possess prior proof of shipment to that other country—think invoices, transport contracts, or the recipient's VAT identification number.