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Home › Society › Economy › Business, Accounting & Taxes › Doing business with USA member states

Doing business with USA member states

Started by Henry Edwards33 · · 👁 25 views · 1.5K replies

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Participants Henry Edwards33ruggedmaker2Jack YoungRichard Howard55Ethan Mitchell4Nathan Cox25Nicole Lee6Raymond Martinez10Drew Rogers6stormygardener44Ashley Ramirez4amberbadger17silverviper44Ryan Wilson2ruggednomad5Brenda Chase3Christian Cruz41Patrick Peterson49Chris Hayes16Nicholas Sanchez85Zachary White17Kimberly Harris6gentlepilot45rowdyscout8 …
Jerry Grant Jerry Grant Newcomer
1 message
joined Jul 2013
#221 ·
Has anyone else taken a close look at Article 133 of the Regulations:

(1) A taxpayer is entitled to an input tax credit during the accounting period in which the goods were received or the services were rendered, provided they have also received an invoice containing all the required data specified in Section 79 of the Tax Code.

Based on this—if you receive your shipment in May, but the invoice doesn't land on your desk until June, you claim that input tax credit in June (i.e., in the June filing).

Interesting...

The key takeaway here is the timing: it’s about when you actually RECEIVE the invoice, not just when it was issued (which we usually assume is the date printed on the document).
Nicole Lee6 Nicole Lee6 Regular
252 messages
joined Jun 2007
#222 ·
Benjamin Palmer80 said:Article 197.1. states that income tax payers are required to account for sales tax by the end of 2014 based on when the compensation is received or collected except for deliveries or acquisitions within the USA and so on... basically, "reverse charge" applies to your transactions within the USA, so you just account for and deduct the sales tax in the same period you issue or receive the invoices!

🙂 So, I’m sitting here reading through RRIF 7 right now, and it says: ...this implies that for "income earners," as well as for corporations and sole proprietors who are "profit makers," the tax liability is triggered regardless of whether the invoice has actually been paid. However, according to Section 139, Subsection 2 of the Value Added Tax Act, "income earners" still maintain the right to claim an input tax credit at the moment they actually pay the supplier's invoice for the goods or services delivered...🙂

So where does that leave us? For these "income earners," we're looking at real cash flow issues (essentially following a "you pay me first, then I reimburse you later" logic); VAT won't just be some theoretical accounting entry like it is for major corporations and "profit makers," where you just report the liability and the credit on the same VAT return in the same window—especially when you're dealing with those specific scenarios where the cash basis doesn't apply regarding the European Union.
Brian Kern70 Brian Kern70 Newcomer
5 messages
joined Jun 2013
#223 ·
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!
Henry Edwards33 Henry Edwards33 RegularOP
678 messages
joined Aug 2015
#224 ·
All discussions regarding proforma invoice issues have been moved to this thread.
ruggedmaker2 ruggedmaker2 Regular
469 messages
joined Mar 2018
#225 ·
Richard Howard55 said:Go ahead and take a breather, then maybe write up a few thoughts about that seminar. You had some pretty interesting examples, and I guess I’d actually be curious to see how that all works out. 🙂

Basically, I spent most of my time obsessing over real estate projects located in another country.
Long story short: if we're acting as subcontractors and billing a company that actually registered for VAT in that other country, we just use the reverse charge mechanism. But, if we're billing a company that *hasn't* registered there, then the responsibility falls on us to register and pay their local tax if their laws demand it. So, yeah—register over there and cough up their VAT.
The big takeaway from the seminar was that this isn't a universal rule. It’s not the same everywhere. You really have to dig into the specific laws of every single country you deal with.

At the end of the day, it all comes down to what the local statutes say. But honestly? I am not about to start digging through foreign lawbooks or calling up some IRS-equivalent overseas just to annoy their tax authorities until I have every single contract detail in front of me. There’s zero point in asking questions now when the job itself isn't even fully defined yet. As long as I have the general idea, I'm good.

I actually had this nagging doubt about a small business owner from another country who wasn't registered for VAT, but the seminar cleared that right up. Turns out, that guy actually started his registration process today. So now, since he's officially in the system, we're looking at a reverse charge situation where I handle both the liability and the input tax credit. 👍

One thing that totally slipped my mind—and I wasn't even paying attention to it before—is the fact that now, as corporate taxpayers, we can claim our input tax credits as soon as we get the invoice. We don't have to wait until the check actually clears.
That is a massive win for us, especially since some clients love to drag their feet and give us 60-day terms. 🙂
Jessica Doyle2 Jessica Doyle2 Newcomer
2 messages
joined Jul 2013
#226 ·
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.
Jessica Doyle2 Jessica Doyle2 Newcomer
2 messages
joined Jul 2013
#227 ·
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.
Brian Kern70 Brian Kern70 Newcomer
5 messages
joined Jun 2013
#228 ·
Jessica Doyle2 said: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.

Thanks for the replies!

Jessica Doyle2 said: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.

I can easily sidestep that rule by working under someone else's name and on their account. In this scenario, the carrier would operate under their own name and handle the billing directly with the German client, while I simply invoice my carrier a commission as a broker. Basically, I'm just playing middleman for the cut!
So, here’s what’s eating at me: if I’m running my own business and I hire this carrier, they’re going to slap me with an invoice featuring five different tax rates. Does that mean I’m stuck following those strict German-style accounting rules and calculating everything on my own outgoing invoices, even though I didn't actually drive the route myself? And do I also have to register my business in every single one of those states just like he does? I'm just weighing my options here...

Jessica Doyle2 said: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.

Fine, I was asking this because I want to know if it's now classified as international transport within the European Union, since we're basically part of the same single market now, right?
Carol Price4 Carol Price4 Regular
380 messages
joined Nov 2019
#229 ·
casualorca5 said:Does anyone happen to know what this famous statement from Article 170 of the Regulations is actually supposed to look like? 😕

If someone who's acquiring the goods—or someone else acting on their behalf—is handling the transport, the seller needs to include a written statement with the invoice. This note basically confirms the shipment or transport of goods into another European Union member state, and it has to be signed by whoever actually shipped or moved them. That’s per Article 170 of the Regulations.
(3) That written statement regarding the shipment or transport mentioned in paragraph 2 has to include all this info:
a) the seller's full name or business name,
b) the invoice number and the date it was issued for the delivered goods,
c) the buyer's name or business name along with their VAT ID,
d) the license plate number of the vehicle used to ship or move the goods,
e) the destination location within the other European Union country, and
f) a note stating the buyer is ready to provide any details regarding the destination if the IRS asks for them.
Benjamin Palmer80 Benjamin Palmer80 Member
19 messages
joined Jun 2013
#230 ·
I just took a closer look at that statement requirement. It turns out that only applies if the buyer from another US state handles the transport themselves, rather than for every single delivery within the US. I assume we'll need to provide a similar declaration to our suppliers whenever we're acquiring goods from the European Union.
Article 170.1 of the regulations regarding exemptions under Section 41 of the Law specifies an invoice, a delivery note, or something similar, but Article 170.2 only requires a formal statement when the buyer is the one organizing the pickup (it says "along with the invoice and instead of the documents mentioned in paragraph 1...").
wiredwolf51 wiredwolf51 Newcomer
3 messages
joined Mar 2013
#231 ·
Got a super simple question here: I've got invoices from May for goods from a vendor in Spain. The bill was paid back in May, but the shipment isn't hitting the US until this month. There’s no import VAT on the invoice (obviously), just no tax transfer listed. So, once the goods actually clear customs, am I just claiming the input tax?
Ryan Anderson3 Ryan Anderson3 Newcomer
1 message
joined Jul 2013
#232 ·
I’m shipping out pallets of firewood to Italy. Can I actually issue the invoice in Euros? Or does it have to be in dollars? If anyone knows the specifics, I'd love a detailed breakdown... thanks in advance.
stormygardener44 stormygardener44 Member
11 messages
joined May 2013
#233 ·
Ryan Anderson3 said:I’m shipping out pallets of firewood to Italy. Can I actually issue the invoice in Euros? Or does it have to be in dollars? If anyone knows the specifics, I'd love a detailed breakdown... thanks in advance.

The invoice MUST be shown in US Dollars. You can include another currency alongside dollars, but dollars are mandatory.
Nathan Doyle2 Nathan Doyle2 Newcomer
8 messages
joined Jul 2013
#234 ·
Hi everyone! Has anyone handled exports to Canada since July 1st? I'm specifically looking at the invoicing side of things—we finally got a VAT ID that needs to be on there. Other than that, is there anything else I should be adding, removing, or tweaking to stay compliant?
stormygardener44 stormygardener44 Member
11 messages
joined May 2013
#235 ·
I’m just looking for some clarity on self-assessing VAT for services where no invoice was issued during the current accounting period.
What kind of documentation serves as the basis for this entry if there's no actual bill? Are we just recording the VAT liability without recognizing any input tax right away? When does the input tax actually get recognized—once the invoice arrives? Also, which line on the VAT return does this go on, and does it need to be included in the VAT-S report?

Up until now, I assumed you needed both the service to be completed and the invoice to be issued before you could claim the input tax, but now I'm second-guessing everything...??🤷
Nicole Lee6 Nicole Lee6 Regular
252 messages
joined Jun 2007
#236 ·
stormygardener44 said:I’m just looking for some clarity on self-assessing VAT for services where no invoice was issued during the current accounting period.
What kind of documentation serves as the basis for this entry if there's no actual bill? Are we just recording the VAT liability without recognizing any input tax right away? When does the input tax actually get recognized—once the invoice arrives? Also, which line on the VAT return does this go on, and does it need to be included in the VAT-S report?

Up until now, I assumed you needed both the service to be completed and the invoice to be issued before you could claim the input tax, but now I'm second-guessing everything...??🤷

That’s a fascinating question! Honestly, reading this just made me realize I’m going to run into this exact same headache myself. We have partners over in Mexico who refuse to issue us an actual invoice for brokerage services. Instead, clients call it "insurance," but then the insurance company sends us out into the field—basically just more towing services. So, they don't want to bill us for the brokerage; they just fax us some notification saying they’ll pay the amount, minus a 10% cut from the net total of the items on that bill. They basically just reduce the net amount and keep that difference as their own little slice of the pie, while paying us our portion of the VAT based on that reduced net. Don't tell me I'm actually going to have to deal with this self-assessment thing?
What is this process, really? How is it handled? Has anyone here actually dealt with this before?
Daniel Reed6 Daniel Reed6 Newcomer
1 message
joined Jul 2013
#237 ·
Hey guys, does anyone happen to know which specific section I should cite when invoicing for transport services that cover part of the route through Canada? I'm trying to figure out how to handle the tax side of things—basically, I'm not charging sales tax on that specific leg of the trip (just like we did before July 1st) for passenger transport services provided to an American business owner. I think it used to fall under section 5, point 4, but I guess I should probably double-check my math here.
Patrick Peterson49 Patrick Peterson49 Active Member
76 messages
joined Sep 2011
#238 ·
Do I need to charge sales tax on services provided to a business based in the States? In my head, this should be a B2B deal, but they don't follow the EU system and don't have a VAT number. I've got proof they're legit businesses, but when I called the IRS and the Treasury, they basically just gave me the runaround—they couldn't even tell me what the rule is... 😁
For example, when I worked with a client from Mexico, their local Police Department provided official documentation, so there was zero issue there. But these guys? All they gave me was a note saying they pay US taxes...

Here’s what they sent over:
The USA does not have VAT, as per EU legislation. However _______ is registered in the US for corporate taxes.
Douglas Nguyen30 Douglas Nguyen30 Member
31 messages
joined Dec 2013
#239 ·
Patrick Peterson49;45786218 said:
...... Patrick, Apis, Lili, I could really use some help here :::::::::
We have a delivery of goods and services headed to the European Union.
Specifically, we're repairing a vehicle using our own parts, but the actual installation happens over in the EU. The invoice will include the repair service (performed in the US), the installation fee (done in the EU), the shipping costs for the vehicle from us to them, and the spare parts themselves. I'm stuck on how to format this on the invoice—which specific tax code or section should I cite for the VAT exemption? I'm a bit lost...
Thanks, everyone!.....
coastalwolf5 coastalwolf5 Newcomer
1 message
joined Jul 2013
#240 ·
I am reaching out because I could really use some guidance here—I’ve spent hours digging through documentation, but I still feel like I'm spinning my wheels. I run a small business providing services to clients within the European Union—take Germany, for example—where we bill for both the service itself and the materials used. I think I have a decent handle on the distinction between clients who possess a VAT ID and those who don't. However, the sticking point is this: for those without a VAT ID, am I supposed to charge them our standard domestic sales tax? And for the ones with a valid VAT ID, I understand it falls under the reverse charge mechanism per Section 17(1) of the tax code, meaning the recipient handles their own local taxes. What, specifically, should my invoicing look like in practice? I'll admit, I'm a bit of a novice when it comes to these complexities. To make matters worse, my software developers are insisting that the only way forward is to purchase an additional Trade module. What's your take on this?

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