Hey everyone, we’re currently undergoing an audit for the 2013 fiscal year. Basically, we have to reconcile everything, submit documentation, and explain any discrepancies or inconsistencies found in our sales tax filings—whether we over-reported or if our suppliers from within the USA reported less than we did, or didn't report anything at all. So, I'm sitting here scanning these invoices and a question popped into my head: when you're purchasing goods from a US supplier under a reverse charge setup, is it possible to categorize that small shipping fee (say, $50) as a service acquisition rather than part of the goods acquisition? In the past, I’ve always just lumped the entire total into the cost of goods. Any thoughts?
mistyseal51 said:From what I gather, registering for Sales Tax requires being set up on the IRS portal. Getting access means paying for a digital certificate. I’ve heard they’ve been having some technical glitches with their servers lately, so I’m not entirely sure how much of a headache that process is going to be right now.
Or am I totally off base here and there's just a simple way to handle this?
Exactly. Once a business is registered for Sales Tax, they are legally required to submit all their filings through the IRS online system. This means you have to purchase an official digital ID and certificate, which isn't exactly cheap. On top of that, it usually necessitates hiring an Accountant to handle the specialized ledger work. Since you're operating as a sole proprietor under the standard tax regime, you aren't even in the Sales Tax system, so I don't see why you'd bother. Your only real option might be submitting an aggregate report in paper form to your local IRS office—assuming they even allow that. An aggregate report is specifically used to document goods and services provided to other countries within the European Union. You'll need the specific country code, their VAT ID number, and the total value of the services rendered, all of which you'd plug into the form for the relevant tax period.
mistyseal51 said:AICPA consultant: No Tax Associate: No Accountant #1: I have no idea Accountant #2: Maybe RRIF: Yes I managed to get a phone number from the IRS, but nobody ever picked up. Instead of calling again, I just sent an inquiry through their online contact form. Now, I'm just waiting on a response.
If you take a closer look at that FAQ you linked, that last sentence feels off. What does it have to do with Sales Tax not being charged if there's a transfer of tax liability?
You might want to check out sections 17, 77, and 90 of the Sales Tax code. Based on those, I can't say for certain which way it goes either.
I'm still waiting on that email from the IRS. If they tell me it's required, I'll grab the ID and use it. But honestly, it’s not practical because I'd end up needing to hire a professional bookkeeping service.
As an accountant, my take is that you really should be requesting a Sales Tax ID since you're dealing with transactions involving European Union countries. However, since you're exempt from calculating and paying Sales Tax under Section 90, you won't actually need an accountant until you hit the threshold$49833 where you transition into small business status, at which point you'll definitely need one and will no longer qualify for simple cash-basis reporting.
Thanks so much. That makes a lot more sense now. My main question is how to actually record these invoices in our company books—how should I reflect the expense? Should I be booking them without sales tax? We already know the drill with IKEA since we told the business owners they needed to exchange VAT IDs (I'm over in accounting myself).
Man, this is such a headache. I actually called the IRS today, and the lady on the line told me I just need to log everything in my sales tax records and make sure to include it under the acquisition of goods from the European Union. Since I still have those two cash receipts from IKEA in Austria where their local tax was already calculated and paid—even though they were cash transactions—I have to account for them. As for that lodging bill, we ended up paying that later via online banking.
I really need some help here. My sales tax filing deadline is tomorrow, and I’m stuck on one specific invoice. It’s a B2B lodging service—an Austrian company billed my firm because an employee was away on a business trip. They charged their local VAT at both 10% and 20%. I’m trying to record this under imported services from the European Union and file the appropriate paperwork, but the bookkeeping part is tripping me up. When I enter the data, should I be using the net amount or the total gross amount? Also, how am I supposed to input their VAT rates when my accounting software only has fields set up for our standard US tax brackets, like 5%, 13%, and 25%? To make matters even more confusing, there's also a local occupancy tax they included that isn't even taxable. Any advice?