Doing business with USA member states

If I'm reading this right, starting July 1st, will corporations be able to claim those prepayments on the R-2 forms immediately?

Nathan Doyle2 said: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?

It’s VAT-exempt under Section 45 of the Law,

Regarding Section 81—amounts should be in USD,
Section 79 covers mandatory invoice details.
Is EUR1 still valid for Canada? Probably not the old one/US-CEFTA/
As for declarations—it might be best to check with your customs broker; I assume things have settled by now.

Christian Cruz41 said:If I'm reading this right, starting July 1st, will corporations be able to claim those prepayments on the R-2 forms immediately?

You nailed it. Spot on. 👍

Has anyone actually tracked down a specific section in the Tax Code or the Regulations that clarifies whether the reverse charge note needs to be added to an invoice under Article 41.1.a
? Or does that note strictly apply to transactions covered by Article 10 (triangular trade)?

Ethan Bailey18 said:Has anyone actually tracked down a specific section in the Tax Code or the Regulations that clarifies whether the reverse charge note needs to be added to an invoice under Article 41.1.a
? Or does that note strictly apply to transactions covered by Article 10 (triangular trade)?

Check out Section 79, subsection 7 of the Tax Code

(7) If the recipient is the one on the hook for the sales tax, the supplier has to include the phrase "reverse charge" or the English equivalent on the invoice.

Christian Cruz41 said:If I'm reading this right, starting July 1st, will corporations be able to claim those prepayments on the R-2 forms immediately?

ruggedmaker2 said:You nailed it. Spot on. 👍

where did you guys find that? Like an article or something... totally missed it myself...

total mess on the IRS website

they're claiming they posted updated XML schemas—you know, for sales tax and all that—but the link is broken. it doesn't even show the new ones... honestly, it's just looping back to the old version from last year😂

Patrick Peterson49 said:where did you guys find that? Like an article or something... totally missed it myself...

Look, under the old IRS regulations, Article 133 was pretty clear:
2) In addition to the requirements in paragraph 1 of this article, when taxing based on collected fees (Article 17, paragraph 3 of the Code), the condition must also be met that the invoice used to claim the input tax credit has actually been paid.

But in the updated tax code, they just scrubbed that whole rule. Now, among other things, it just says:
"(1) The taxpayer is entitled to an input tax credit in the accounting period during which the good was received or the service was performed, provided an invoice containing all data required by Article 79 of the Code has been received."

Thanks!
totally missed that... 😠

If an American carrier moves goods from the European Union over to Canada, and they're billing a Canadian client for the transport service, they'd fall under section 45(1)(38) of the tax code... does the invoice actually need to mention reverse charge?

If they’re considered a business taxpayer in America, then yeah, absolutely.
But you can't just take their word for it—you actually need to grab a certificate or some kind of paper trail to prove it. I think we touched on this somewhere else in this thread, so maybe scroll back and give it a look.

Look, whenever you’re sending out an invoice, you have to know exactly what the tax status of your client is, and you better have the proof to show for it if anyone comes knocking. If you're dealing with someone from the European Union, you verify them through a Viasat lookup, but if they're coming from outside the EU, the burden is on them to hand over documentation proving their status.
I'm talking about B2B scenarios here, obviously. 🙂
When you're dealing with a regular individual? Man, that's a whole different ballgame.

Patrick Peterson49 said: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.

ruggedmaker2, what do you think about this... do I charge tax or not when dealing with Americans? 🤷
Oh, one more thing... while doing this work, I run into expenses—travel, phone bills, gas, translations, copies, etc.—which I then invoice back to the US and other places. Should those be taxed too, or would that just count as part of the service under that B2B rule? Personally, I'm thinking no tax should be added, it should just follow the service line...

Thanks, Daisy!
I’d love to get some thoughts on this:
A trucking company provides transport services through an intermediary (the tax obligor here in the US) to Austria. Does that trucking company charge the intermediary sales tax or not? I'm certain the intermediary handles the reverse charge, but I suspect the trucker should be issuing an invoice with sales tax included—yet they keep insisting it's a zero-tax invoice...

Patrick Peterson49 said:ruggedmaker2, what do you think about this... do I charge tax or not when dealing with Americans? 🤷
Oh, one more thing... while doing this work, I run into expenses—travel, phone bills, gas, translations, copies, etc.—which I then invoice back to the US and other places. Should those be taxed too, or would that just count as part of the service under that B2B rule? Personally, I'm thinking no tax should be added, it should just follow the service line...

First off, you really need to pin down exactly what kind of service you're actually performing. It’s a totally different ballgame whether you’re doing real estate consulting, legal representation, or IT work—plus, some services are exempt from tax altogether. You’ve got to dig into the tax code and the regulations to see where the "place of taxation" actually falls for your specific situation.

Take a look at Article 41 of the regulations; it breaks down what gets added to the tax base for goods or services. Check that out specifically based on what you're actually invoicing them for.

If they’re legitimate businesses, I’m pretty sure you can skip the sales tax using the reverse charge method. They’ll handle the tax on their end over there.
If you’re doing this constantly and pulling in decent money, my advice? Don't play games. Get a formal written opinion from the Internal Revenue Service in Washington, D.C. so you can sleep at night knowing you're 100% covered.
Just grab the statement they sent you, draft a quick letter, and mail an inquiry to their office at 1600 Pennsylvania Avenue NW. Word is, they get back to you pretty fast.

Hey there! So, we actually had an export shipment heading over to Canada last week—it was a bit of a headache, honestly! Some statements changed at the last minute, which left our freight forwarders scrambling for info, but hey, we managed to pull it off in the end. Anyway, I wanted to pick your brain on something—I’ve been drafting my invoices in US Dollars, just like always, without explicitly mentioning any other currency since I was told it wasn't necessary—and I haven't included the reverse charge note either... does that sound right to you?

ruggedmaker2, thanks so much. That’s exactly what I was thinking—but honestly, getting a little confirmation really helps amidst all this chaos...

Nathan Doyle2 said:Hey there! So, we actually had an export shipment heading over to Canada last week—it was a bit of a headache, honestly! Some statements changed at the last minute, which left our freight forwarders scrambling for info, but hey, we managed to pull it off in the end. Anyway, I wanted to pick your brain on something—I’ve been drafting my invoices in US Dollars, just like always, without explicitly mentioning any other currency since I was told it wasn't necessary—and I haven't included the reverse charge note either... does that sound right to you?

All invoices have to be listed in USD—it’s clearly stated in the law—though you can certainly include another currency alongside it if you need to.

What’s the deal with exporting to non-USA countries? Exports have always been VAT-exempt... so do I really need to mention reverse charge here—I'm thinking maybe not, OR am I totally overthinking this mess?

Also, if I have a driver on the clock, but the truck ends up sitting idle for three days because the cargo isn't ready—how do I bill a customer from the USA versus one from a third country? For a domestic customer, I just add tax to the price, right? What about the others? Hmm...

Sorry if you guys already covered this and I just missed it...

Thanks for the help

David Kelly37 said:All invoices have to be listed in USD—it’s clearly stated in the law—though you can certainly include another currency alongside it if you need to.

Hmm... they only mentioned Euros to me—just lovely... so what now? Do I just convert everything back to Dollars and send them a corrected invoice?

Nathan Doyle2 said:Hmm... they only mentioned Euros to me—just lovely... so what now? Do I just convert everything back to Dollars and send them a corrected invoice?

Yeah—you definitely have to. The lady at the IRS told us invoices absolutely have to be in dollars, though we can use other currencies if we want. Our programmer set it up with dollars as the main currency since that's how it has to be, but I still print out the USD amounts because basically 99 percent of our customers are overseas anyway!