Doing business with USA member states

Richard Howard55 said:Article 79 lists everything required for an invoice under the sales tax law.
If the law allows it, you can claim the credit.
In paragraph 12 of that same article, they added another type of receipt (which the IRS website says also works for credits) called a "simplified invoice." The difference here is that prices are shown inclusive of sales tax (like a price tag in a shop), rather than the "standard" way where you list the item price, then the tax, then the total at the bottom.
Now, here is the catch: that "simplified" invoice cannot exceed $233. I have no clue if that's 700.00 including tax or before tax, because the law just says... "for deliveries of goods or services..." (what exactly counts as a delivery in this context? Honestly, I don't feel like digging that up, I'd rather $233 and call it a day).
And that’s where this whole wholesale headache starts, since those follow the full requirements for a "proper" invoice.
I suspect retailers are being told things have become "complicated," and everyone will just have to figure out their own way to deal with it (probably by praying the software developers come up with something to get us out of this mess).
There. I tried to explain. Maybe it helps, maybe not....

Also, could someone explain which boxes on the sales tax form should be used for shipments to the USA (or even other countries), assuming I have proof they are tax-exempt and I still need to account for "domestic" sales tax?

Check Section 175 of the Regulations; that should go under subsection II.3. They lumped everything together there, even the 22% and 23% shipments.

David Parker44 said:So, from what I gather, I can just keep issuing retail receipts exactly like I have been, right? Since there aren't any changes to the retail format, I can still issue an R-1 higher than $233???🙄

Unbelievable. I honestly don't think even Linić fully understands this!

Exactly. A retail receipt can easily run into thousands of dollars, and honestly, nothing has actually changed compared to how things used to be. The only real difference is that the specific formats for those receipts aren't dictated by the Value Added Tax Act anymore; now they fall under the Internal Revenue Code. So, I guess just keep doing what you've always done and enjoy the ride.
Look, if you end up with a customer—a taxpaying business, specifically—and you need to issue them an invoice, that total can't exceed... $233 As it stands, it won't work. It needs to be restructured to comply with the Value Added Tax Act if they actually want to claim that input tax credit.
Look, the bottom line is this: you have to actually step into the shoes of a customer like that. It’s not just theory—you have to realize how much it matters to them whether they can claim that input tax credit or not. If you approach things with that kind of mindset, you're basically driving your customers straight into the arms of a competitor who’s actually willing to issue an invoice that lets them write off the tax. I guess if you don't, you'll just lose them. Maybe.

casualorca5 said:Check Section 175 of the Regulations; that should go under subsection II.3. They lumped everything together there, even the 22% and 23% shipments.

Thanks. I'm heading off to hit the books. 🙂

Richard Howard55 said:Exactly. A retail receipt can easily run into thousands of dollars, and honestly, nothing has actually changed compared to how things used to be. The only real difference is that the specific formats for those receipts aren't dictated by the Value Added Tax Act anymore; now they fall under the Internal Revenue Code. So, I guess just keep doing what you've always done and enjoy the ride.
Look, if you end up with a customer—a taxpaying business, specifically—and you need to issue them an invoice, that total can't exceed... $233 As it stands, it won't work. It needs to be restructured to comply with the Value Added Tax Act if they actually want to claim that input tax credit.
Look, the bottom line is this: you have to actually step into the shoes of a customer like that. It’s not just theory—you have to realize how much it matters to them whether they can claim that input tax credit or not. If you approach things with that kind of mindset, you're basically driving your customers straight into the arms of a competitor who’s actually willing to issue an invoice that lets them write off the tax. I guess if you don't, you'll just lose them. Maybe.

Thanks. I'm heading off to hit the books. 🙂

Is it actually a mistake to issue the new style of invoices for all retail sales—meaning, with the tax calculated at the end? Because over at Synesis, they have the usual cash receipt plus the new MP invoice and the VP invoice, and apparently, we're supposed to use them like this:
1. For regular citizens: Cash Receipt
2. For the "tax credit seekers" under $233: MP invoice
3. For the "tax credit seekers" over $233: VP invoice.
It feels incredibly complicated to me—three different types of receipts, three different payment terminals, and the constant headache of potential issues (like a customer asking for a business invoice first, then changing their mind, etc.) which leads to a mountain of voided transactions that we just don't need.

So, is there any actual reason (some legal mandate or official directive) why we shouldn't just issue the new type of invoice to everyone (the VP version in Synesis, where the tax is totaled at the bottom)?
Because that would give us one single workflow for all retail, keeping everything simple—if you enter the customer info, great; if you don't, also fine. 🙂

Thx!

slygardener86 said:Is it actually a mistake to issue the new style of invoices for all retail sales—meaning, with the tax calculated at the end? Because over at Synesis, they have the usual cash receipt plus the new MP invoice and the VP invoice, and apparently, we're supposed to use them like this:
1. For regular citizens: Cash Receipt
2. For the "tax credit seekers" under $233: MP invoice
3. For the "tax credit seekers" over $233: VP invoice.
It feels incredibly complicated to me—three different types of receipts, three different payment terminals, and the constant headache of potential issues (like a customer asking for a business invoice first, then changing their mind, etc.) which leads to a mountain of voided transactions that we just don't need.

So, is there any actual reason (some legal mandate or official directive) why we shouldn't just issue the new type of invoice to everyone (the VP version in Synesis, where the tax is totaled at the bottom)?
Because that would give us one single workflow for all retail, keeping everything simple—if you enter the customer info, great; if you don't, also fine. 🙂

Thx!

I've actually done exactly that in certain situations in previous years, issuing large A4 invoices with the tax listed at the end for standard retail sales, and I ran into issues with the IRS on a few occasions. They seemed to interpret it as "misleading" the retail consumer, citing some section of the Consumer Protection Act, and essentially forced us to change our workflow so that we had to issue invoices where the unit price and everything else already had the Value Added Tax baked in.

Question

I’m bringing in some inventory from the European Union, and my colleague in logistics already handled all the customs stuff. My question is about the tax side of things. Since there isn't an actual cash flow involved—where the liability and the credit happen simultaneously on the tax return—and we don't deal with those old JCD forms or VAT on them anymore, I'm stuck. How exactly do you calculate the VAT amount for this type of acquisition? All I have on hand is the invoice from the foreign vendor, the shipping docs, and the CMR. I’ve searched everywhere—the Internal Revenue Code, the regulations, even the IRS website—but I can't find a straight answer anywhere.

Anyone happen to know the drill here?...🤷

Brandon Anderson10 said:Question

I’m bringing in some inventory from the European Union, and my colleague in logistics already handled all the customs stuff. My question is about the tax side of things. Since there isn't an actual cash flow involved—where the liability and the credit happen simultaneously on the tax return—and we don't deal with those old JCD forms or VAT on them anymore, I'm stuck. How exactly do you calculate the VAT amount for this type of acquisition? All I have on hand is the invoice from the foreign vendor, the shipping docs, and the CMR. I’ve searched everywhere—the Internal Revenue Code, the regulations, even the IRS website—but I can't find a straight answer anywhere.

Anyone happen to know the drill here?...🤷

Reporting acquisitions on the VAT return
When acquiring goods within the European Union, the taxable person reports the assessed VAT on the acquisition on their VAT return, but they also report the right to deduct that same tax in the same filing. This means there is NO physical cash payment required for the VAT.

Example:
A business in the European Union supplies goods to a domestic business for $10,000.00.
The European entity issues an invoice but does not charge VAT—as it is a supply to a US business.
The US business calculates the VAT on the goods purchased from the European entity and simultaneously uses that calculated VAT as an input credit.
Consequently, the US business will not physically pay any VAT on the acquisition of goods from the European supplier.

$10,000.00 x the Federal Reserve exchange rate on the date of acquisition (e.g., 1.25)
x 25%
= $12,500.00 x 25% = $3,125.00 VAT

Accounting entries:
Accounts Payable - Vendor (Credit)
Inventory (Debit)
VAT Payable on Acquisition - Liability (Credit)
Input VAT on Acquisition - Credit (Debit)

Douglas Nguyen30 said:Reporting acquisitions on the VAT return
When acquiring goods within the European Union, the taxable person reports the assessed VAT on the acquisition on their VAT return, but they also report the right to deduct that same tax in the same filing. This means there is NO physical cash payment required for the VAT.

Example:
A business in the European Union supplies goods to a domestic business for $10,000.00.
The European entity issues an invoice but does not charge VAT—as it is a supply to a US business.
The US business calculates the VAT on the goods purchased from the European entity and simultaneously uses that calculated VAT as an input credit.
Consequently, the US business will not physically pay any VAT on the acquisition of goods from the European supplier.

$10,000.00 x the Federal Reserve exchange rate on the date of acquisition (e.g., 1.25)
x 25%
= $12,500.00 x 25% = $3,125.00 VAT

Accounting entries:
Accounts Payable - Vendor (Credit)
Inventory (Debit)
VAT Payable on Acquisition - Liability (Credit)
Input VAT on Acquisition - Credit (Debit)

Maybe there's also a shipping invoice to consider. I suppose that needs separate handling regarding sales tax, depending on whether the carrier is domestic or from overseas?😕

casualorca5 said:Maybe there's also a shipping invoice to consider. I suppose that needs separate handling regarding sales tax, depending on whether the carrier is domestic or from overseas?😕

Actually, that’s been bugging me too. Since we handle our own procurement... there's that tricky overlap between the carrier and the actual purchaser of the goods. 🤷

Douglas Nguyen30 said:Reporting acquisitions on the VAT return
When acquiring goods within the European Union, the taxable person reports the assessed VAT on the acquisition on their VAT return, but they also report the right to deduct that same tax in the same filing. This means there is NO physical cash payment required for the VAT.

Example:
A business in the European Union supplies goods to a domestic business for $10,000.00.
The European entity issues an invoice but does not charge VAT—as it is a supply to a US business.
The US business calculates the VAT on the goods purchased from the European entity and simultaneously uses that calculated VAT as an input credit.
Consequently, the US business will not physically pay any VAT on the acquisition of goods from the European supplier.

$10,000.00 x the Federal Reserve exchange rate on the date of acquisition (e.g., 1.25)
x 25%
= $12,500.00 x 25% = $3,125.00 VAT

Accounting entries:
Accounts Payable - Vendor (Credit)
Inventory (Debit)
VAT Payable on Acquisition - Liability (Credit)
Input VAT on Acquisition - Credit (Debit)

But what exactly constitutes the "date of acquisition" here? Is it the invoice date, or the actual day the goods land in the States? Because there can be quite a gap between those two, which obviously means the exchange rate shifts accordingly.

I’m feeling a bit lost in the weeds with this conversion stuff; everything feels like a total blur right now. "If the elements used to determine the tax base—excluding imported goods—are determined in a foreign currency, the mid-market exchange rate from the Federal Reserve on the date the VAT liability arises shall be used ."

What does that actually mean in practice? For instance, if I have an invoice from an overseas partner who is transferring the tax liability to us, and let's say the invoice is dated July 20th, 2013.
When exactly does the VAT liability arise? Which mid-market rate am I supposed to use: the one from July 20th, the one from July 31st, or the one from August 20th when the actual VAT return is due? 🤷

Richard Howard55 said:Regarding this thread, it was already added to the VAT Act (Article 54a), and now it’s back in US Congress because they're adding Article 54.b (due to fiscalization). It defines who doesn't need to issue receipts.

Cash register receipts

Article 54.a

Cash register receipts, tape slips, or payment terminal confirmations must include at least the following data:
1. the number and date of issuance,
2. the name, address, and EIN of the business providing the goods or services, along with the location where the delivery occurred (store number, office, shop, etc.),
3. the quantity and standard trade name of the goods delivered, plus the type and quantity of services performed,
4. the total amount of compensation and tax, broken down by tax rate.

What should I actually list as the service location on a receipt when I'm out in the field issuing an invoice from a tablet via a mobile POS terminal? (And just a side note—I can't quite figure out how to format that specific part in my current setup). Honestly, I don't even see a dedicated field in the software settings to input a specific location. Does anyone have a practical workaround or a clever way to handle this?🤔 Is it actually possible to use the fiscal transaction number for that purpose? Specifically, I'm wondering if using the second digit of the business premises identifier would be sufficient. Is that enough to get the job done?

Nicole Lee6 said:I’m feeling a bit lost in the weeds with this conversion stuff; everything feels like a total blur right now. "If the elements used to determine the tax base—excluding imported goods—are determined in a foreign currency, the mid-market exchange rate from the Federal Reserve on the date the VAT liability arises shall be used ."

What does that actually mean in practice? For instance, if I have an invoice from an overseas partner who is transferring the tax liability to us, and let's say the invoice is dated July 20th, 2013.
When exactly does the VAT liability arise? Which mid-market rate am I supposed to use: the one from July 20th, the one from July 31st, or the one from August 20th when the actual VAT return is due? 🤷

Just use the rate from the date on the invoice. So, in this case, July 20th. Your business partner is going to report it using that date on their monthly filing, so you need to stay in sync and use that same date for yours.
The latest IRS publication has a specific table that clears up all these headaches regarding when tax liabilities kick in for goods and services within the European Union.

Nicole Lee6 said:What should I actually list as the service location on a receipt when I'm out in the field issuing an invoice from a tablet via a mobile POS terminal? (And just a side note—I can't quite figure out how to format that specific part in my current setup). Honestly, I don't even see a dedicated field in the software settings to input a specific location. Does anyone have a practical workaround or a clever way to handle this?🤔 Is it actually possible to use the fiscal transaction number for that purpose? Specifically, I'm wondering if using the second digit of the business premises identifier would be sufficient. Is that enough to get the job done?

Well, you have "mobile point of sale." 🤣
That's what the official tax guidelines say, so... figure out some magic to make it work with whatever POS hardware you're stuck with. 🙂
It makes sense to define it as a business location via your own internal company policy.
If your software allows it, just slap something like that onto the invoice header.

What actually counts as a business location?
Regarding tax compliance, what qualifies as a business location is mostly left up to the taxpayer. Basically, any physically separate, enclosed space at a different address counts as a business location. Whatever you decide constitutes your business locations needs to be clearly documented in your company's internal policy.
For instance, you could technically run two separate business locations out of one single room—say, for bookkeeping services versus rental services. Or, a business can decide that every individual field service crew counts as its own "business location." If a company operates from a main office but organizes a consulting session at a hotel one day, that hotel is considered the business location for that day. Businesses that operate without a fixed address are classified as mobile (like a chimney sweep or similar).Invoice sequencing is determined by those internal company policies. A business location might follow one sequence, or you can set sequences based on the specific POS device used, or even by document type on the device.
You keep that internal policy on file at your office for when the IRS comes knocking. You don't send it to the IRS.

slygardener86 said:Is it actually a mistake to issue the new style of invoices for all retail sales—meaning, with the tax calculated at the end? Because over at Synesis, they have the usual cash receipt plus the new MP invoice and the VP invoice, and apparently, we're supposed to use them like this:
1. For regular citizens: Cash Receipt
2. For the "tax credit seekers" under $233: MP invoice
3. For the "tax credit seekers" over $233: VP invoice.
It feels incredibly complicated to me—three different types of receipts, three different payment terminals, and the constant headache of potential issues (like a customer asking for a business invoice first, then changing their mind, etc.) which leads to a mountain of voided transactions that we just don't need.

So, is there any actual reason (some legal mandate or official directive) why we shouldn't just issue the new type of invoice to everyone (the VP version in Synesis, where the tax is totaled at the bottom)?
Because that would give us one single workflow for all retail, keeping everything simple—if you enter the customer info, great; if you don't, also fine. 🙂

Thx!

Maybe don't hand out the VP to everyone. You might accidentally trip over some consumer protection law meant for end-users. They probably need to see the final price inclusive of tax upfront.
I haven't dug deep into the specifics, but just to be safe, I'd stick to the Retail Invoice for everyone since it covers all the required payment methods according to standard auditing rules (I wouldn't even touch the cash receipt). The payment reports clearly show the breakdown anyway (cash vs. cards, etc.).
If a "taxpayer" shows up, sure, I'd use the VP, even if they're just buying something small for $12.

Section 41.
(1) The following shall be exempt from sales tax:
a) the delivery of goods where the seller—or someone acquiring the goods on their behalf—ships or transports them from the US to another country to a different taxable entity or a non-taxable legal entity acting as such in that other country.

I’m honestly going a bit stir-crazy reading all this legal jargon—can someone please tell me if I have this right?

- based on that section above, if a US business registered for sales tax receives graphic design files via email from an overseas vendor, then uses those files to run a print job (through some other local contractor), and the customer picks up the goods right there to ship them over to Europe... do I issue the invoice without sales tax and just mark it as "reverse charge," or what?

Douglas Nguyen30 said:Reporting acquisitions on the VAT return
When acquiring goods within the European Union, the taxable person reports the assessed VAT on the acquisition on their VAT return, but they also report the right to deduct that same tax in the same filing. This means there is NO physical cash payment required for the VAT.

Example:
A business in the European Union supplies goods to a domestic business for $10,000.00.
The European entity issues an invoice but does not charge VAT—as it is a supply to a US business.
The US business calculates the VAT on the goods purchased from the European entity and simultaneously uses that calculated VAT as an input credit.
Consequently, the US business will not physically pay any VAT on the acquisition of goods from the European supplier.

$10,000.00 x the Federal Reserve exchange rate on the date of acquisition (e.g., 1.25)
x 25%
= $12,500.00 x 25% = $3,125.00 VAT

Accounting entries:
Accounts Payable - Vendor (Credit)
Inventory (Debit)
VAT Payable on Acquisition - Liability (Credit)
Input VAT on Acquisition - Credit (Debit)

Thanks a ton for the reply! That’s exactly what I was thinking. My only minor headache is dealing with shipping services where sometimes the carrier is international and sometimes they're local. Any tips?

Taxable events trigger at the moment of acquiring goods within the USA. The obligation to account for the tax happens when the invoice is issued or when the deadline hits (per standard tax code... basically by the 15th of the following month if no invoice was sent). Long story short, the date on the invoice is king, so you just use the Federal Reserve exchange rate from that day—unless we haven't received the invoice yet, then follow those rules mentioned above.

One more thing—maybe I’m overthinking this, but I wanted to touch on how shipping works when you're acquiring goods within the USA.

Here’s my take on how the math flows: say a taxpayer in Germany ships some goods to another taxpayer here in the States. They get an invoice for the goods, calculate the sales tax, and report it as both a liability and an input credit on their tax return. On top of that, they have to file the necessary acquisition tax reports with all the specific details included.

Then, for that exact same shipment, they get a bill from a foreign carrier. That’s a separate line item where we look at taxable services and the place of taxation. According to the law, since the service is provided to a domestic taxpayer, the place of taxation is based on the recipient's business headquarters. This means we’d need to calculate the sales tax ourselves and report it on the tax returns and the aggregate filings. In this scenario, a local US carrier would probably just list the tax amount directly on the invoice, but with a foreign one, we have to handle the calculation and reporting on every single filing... And then the IRS just runs checks against whatever database they use?????

Is that basically how the process plays out? 😉

Brandon Anderson10 said:One more thing—maybe I’m overthinking this, but I wanted to touch on how shipping works when you're acquiring goods within the USA.

Here’s my take on how the math flows: say a taxpayer in Germany ships some goods to another taxpayer here in the States. They get an invoice for the goods, calculate the sales tax, and report it as both a liability and an input credit on their tax return. On top of that, they have to file the necessary acquisition tax reports with all the specific details included.

Then, for that exact same shipment, they get a bill from a foreign carrier. That’s a separate line item where we look at taxable services and the place of taxation. According to the law, since the service is provided to a domestic taxpayer, the place of taxation is based on the recipient's business headquarters. This means we’d need to calculate the sales tax ourselves and report it on the tax returns and the aggregate filings. In this scenario, a local US carrier would probably just list the tax amount directly on the invoice, but with a foreign one, we have to handle the calculation and reporting on every single filing... And then the IRS just runs checks against whatever database they use?????

Is that basically how the process plays out? 😉

A carrier from DC, say Vienna-Prague, doesn't charge Sales Tax (B2B).
The American taxpayer calculates the Sales Tax.

An American carrier transports goods for an Austrian taxpayer, say Chicago-Vienna; the American taxpayer doesn't charge Sales Tax (B2B).

An American taxpayer transports goods for an American taxpayer: the carrier charges Sales Tax.
Transport during export = exempt under Section 45 of the Law.
These are just my notes from a seminar; I suppose it takes time for it all to click. 🙄

Basically, if you look through the Treasury Department's guidelines or even your favorite finance mag, you won't find a straight answer on how to tax services when they're shipped from DC to the US. It’s because Article 17 says the tax location is wherever the taxpayer receiving the service is based. Then, Article 20 doesn't say a single thing about the taxing location for a TAXPAYER within the USA... so I guess nobody bothers getting specific since everyone is supposed to just stick to the basics in Article 17. At least, that's my take. I'm heading to another seminar on July 10th, so maybe I'll finally get some real answers there.

casualorca5 said:A carrier from DC, say Vienna-Prague, doesn't charge Sales Tax (B2B).
The American taxpayer calculates the Sales Tax.

An American carrier transports goods for an Austrian taxpayer, say Chicago-Vienna; the American taxpayer doesn't charge Sales Tax (B2B).

An American taxpayer transports goods for an American taxpayer: the carrier charges Sales Tax.
Transport during export = exempt under Section 45 of the Law.
These are just my notes from a seminar; I suppose it takes time for it all to click. 🙄

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?