You’ve lost me a bit here. There isn't a separate ledger for imports and another for acquisitions; there is just one single ledger and a special record as outlined in Section 163, Subsection 4 of the Regulations. Or am I missing something?
Nicole Wells38 said:I’m actually dealing with the exact same thing. I just report the liability and the withholding tax, but since there's no cash changing hands, it ends up being zero. Haha. I'm home for the evening right now, but once I get back into the office tomorrow, I'll double-check the books. My gut feeling is that the service is taxable here because it falls under production services.
Believe me, I'm checking my numbers tomorrow too. I spoke to three different advisors and got three different stories. Our current conclusion seems solid, though, provided we confirm if production services fall under those specific exemptions.
Ethan Bailey18 said:Just make sure you double-check if this specific type of service is actually taxable under our local laws.😛
So, here’s the latest interpretation: we’re calculating the foreign services ourselves, listing them under both Section II and Section III. The only catch is that there's no actual payment required. Honestly, even I’m a bit baffled by this one. I could use some clarity here.
Nicole Wells38 said:Thanks so much, that's incredibly helpful. Since this service was performed locally, we're looking at the standard B2B principle—meaning the place of service is where the recipient is based (which is us). So, I need to account for the sales tax, basically recording both the tax liability and the input credit. That was pretty much how I was picturing it. 😉
Just make sure you double-check if this specific type of service is actually taxable under our local laws.😛
Nicole Wells38 said:Hey everyone, I need a quick gut check on something. I’ve got a service provider based in Mexico invoicing me for a job that's VAT-exempt under their local tax laws—basically, they qualify as a small business taxpayer over there, which is pretty much the same thing as our Section 90 rules back home. Given that, how should I handle the entry? Do I record it with VAT so I can claim the credit, or should I book it as exempt since it doesn't apply? To put it simply: am I required to report any VAT here in the States? Thanks! 😁
It all comes down to where the service is actually performed: if it happens on US soil and our regulations say it's taxable, you have to report the VAT. if it's done in the US and it's non-taxable, you don't. if it takes place in a third country where it isn't taxable, then you don't either. In my book, you just apply the "place of supply" principle, though you might want to run it by a pro to be certain.😛
I can't believe I'm even typing this out—it's absolutely infuriating! Honestly, how many times do we have to go over this? It’s like people just refuse to listen to common sense anymore. You see these ridiculous arguments popping up everywhere, and it makes my blood boil. Every single time I think we've reached a peak of absurdity, someone comes along and raises the bar even higher. It's exhausting! And don't even get me started on what Drew Rogers6 was saying earlier. Seriously? Are we really supposed to take that seriously? Give me a break! It’s pure nonsense, plain and simple. People need to wake up and actually look at the facts instead of just shouting whatever half-baked opinion crosses their minds. It’s driving me insane! kaže: Sales tax is mandatory—period. You use the business Tax ID listed right there on the invoice, which you better have verified through the IRS database, because at the end of the day, you're the one footing the bill!😛
But if we’re talking about Switzerland, then we’re talking about an import—not an acquisition! Seriously!
In that case, you'll receive a Swiss invoice along with the JCD showing the sales tax calculated at the border, which you have to settle within ten days. Naturally, you don't include sales tax on the standard form; you just plug it into column III.14. Someone has to pay the tax eventually...👍
James Parker6 said:The company purchased goods from Italy, but the invoice lists a Swiss address since that's where their headquarters are located. How should we handle the sales tax filing for this?
A VAT return is mandatory. Use the company's VAT number as listed on the invoice and verified via the IRS database, since you are the end consumer.😛
Jeremy Anderson63 said: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.
Jeremy Anderson63 said: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.
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.
Jeremy Anderson63 said: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... 😉
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?🙂
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.
ruggedmaker2 said:Don't sweat it. I totally pulled this one back in August 2013. I logged an entire service invoice as a purchase of goods. I didn't even realize my mistake until they came knocking, asking for scanned copies of specific periods 😁 and honestly? No big deal. The auditor just told me to file a corrected sales tax form and we were done. (It was just some tiny amount, maybe around $67).
The real headache for them isn't even the math; it's that we're being such perfectionists about reporting every single acquisition while the other side is barely keeping track.😁
That comment about our obsessive rule-following is the best thing I've heard lately... 👏 The only thing "THEY" actually know how to say is, "Sorry, you made a mistake... the system can't process this form."
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??😵
The invoice date is the gold standard for determining the exchange rate when importing from the USA. I run into this exact issue when importing from Mexico; the rates never match up, which messes with my VAT base calculations at customs. Even if they differed anyway because they include shipping costs in the base—which is standard practice—I need to know: do I record their specific rate in my books, or stick to the rate from the invoice date? And here's a second scenario... I paid for goods upfront back in September via a deposit from a supplier in Canada. The shipment is still sitting here, and loading isn't scheduled until October 1st. Am I allowed to process the paperwork using September dates? They promised they'd sign off on everything.
🤷I need some advice here. I sent an invoice to a company in Canada, and they paid me in Euros directly into my foreign currency account. I gave them a call to let them know the goods are ready to go. But now they’re telling me to ship everything to their local branch here in the States. The original invoice was, naturally, tax-exempt. What’s the smartest move? Should I transfer the funds from my export account to my domestic one and issue a standard invoice including sales tax to the local branch, then have them settle the difference with the Canadian office through some sort of internal arrangement?
I’m looking for some input here. One of my clients issued an invoice to the European Union—standard stuff, all the necessary notes and details included, VIES confirmation pulled, signed carrier statement in hand. But there’s a catch: all the paperwork, including the exchange rates used, was dated a day before the actual delivery took place. He just didn't want to deal with the hassle of redoing everything. What happens if someone decides to cross-reference this against, say, a driver's logbook or a tachograph?
Hey ruggednomad5, I dealt with something similar once, except my issue involved the ZP while the buyer failed to file their sales tax, the folks at the IRS told me—off the record, obviously—that the data doesn't strictly have to align within a single accounting period. It looks like you handled everything by the book; they’ll just reach out to him if he fails to submit the Zp.
😕In my view, we need to run all approvals through the ZP; I had a situation back in May involving an acquisition from the Netherlands where I secured approval based on early payment and processed it through the VAT system—everything happened within the same month—and I assume they handled it via their own ZP too since nobody has reached out to me yet. Following that same logic, when I issue an approval in the US, my only concern was the date discrepancy since delivery was in July and payment wasn't until August but because they accepted the approval dated July 31st, I’ll just file it under July. My only question is whether there are other sections we should be referencing for these approvals besides Article 41, similar to how we rely on Article 33 when correcting a tax base
Thanks a lot. Honestly, what can I even say? There’s this poor woman over in Canada who’s completely lost and doesn't know her next move, so she just says "If you're going to act like that, then I guess I will too..."