Doing business with USA member states

ruggedmaker2 said:So, I hit up this FBI seminar last Friday, and they were preaching that reverse charge applies to pretty much every B2B deal where you're shifting the tax burden over to the buyer—doesn't even matter if the client is just down in another state or halfway across the globe.
But honestly? The more I dig into the fine print, the less sense it makes. It’s driving me absolutely nuts.

The IRS told us the exact same thing at their seminar too—if you're dealing with a legal entity, the tax responsibility transfers to them, whether they're in the European Union or out of the country.

Nathan Doyle2 said:So, here’s my latest little saga regarding exports to Canada. Basically, I put together an invoice using dollars—but kept the euro amount in there too—added the exemption clause, and included all the standard details without the reverse charge. When I finally mentioned the bill to a seasoned accountant—since I’d been spinning my wheels on it for a few days now—he just looked at me like I was crazy. Apparently, he mostly handles clients in Italy or Austria (and occasionally Canada), and he *never* touches anything in dollars... Heeeeeeeelo... who’s actually losing it here? I tried telling him that including dollars is mandatory—you know, based on what I learned in my training—but he wouldn't budge from his "euros only" rule. Hmm... so, I went ahead and added the reverse charge to the invoice... but now I'm thinking... if he's tripping up on the currency, who knows if he'll mess up this part too?

The invoice has to be 100% in dollars, and you can't use reverse charge for exports.

I’m constantly refreshing those IRS pages, praying they’ll finally give us a straight answer about this miserable reverse charge mess. But nope... nothing 🤷

ruggedmaker2 said:I’m constantly refreshing those IRS pages, praying they’ll finally give us a straight answer about this miserable reverse charge mess. But nope... nothing 🤷

They told me today that they'll be posting those 40 remaining questions on their site tomorrow or the day after...

I’ve got this nagging feeling that even after all this is over, we won't be any closer to seeing clearly. 🤣

ruggedmaker2 said:I’m constantly refreshing those IRS pages, praying they’ll finally give us a straight answer about this miserable reverse charge mess. But nope... nothing 🤷

From what I gather, "reverse charge" can basically apply to any export within the European Union when dealing with a registered taxpayer. It’s just a way of saying the tax liability shifts, even if they should technically cite the specific legal code—but honestly, getting into that level of detail is just splitting hairs 😁

For services, I’ve double-checked everything from professional seminars to calling up consultants directly. Still, I’m going to go over it one more time (maybe two, maybe three) just to be sure. 😁

Henry Edwards33 said:From what I gather, "reverse charge" can basically apply to any export within the European Union when dealing with a registered taxpayer. It’s just a way of saying the tax liability shifts, even if they should technically cite the specific legal code—but honestly, getting into that level of detail is just splitting hairs 😁

For services, I’ve double-checked everything from professional seminars to calling up consultants directly. Still, I’m going to go over it one more time (maybe two, maybe three) just to be sure. 😁

Yesterday, we finally got a written response from the IRS stating that invoices for the USA should only include the exemption clause from the law or regulation, without mentioning reverse charge.

Benjamin Palmer80 said:Yesterday, we finally got a written response from the IRS stating that invoices for the USA should only include the exemption clause from the law or regulation, without mentioning reverse charge.

Thanks. You won't mind if I double-check this one more time, right?
The whole situation is starting to feel like a bad joke. 🤣

I actually went back through my notes from the training seminars because I honestly thought I was losing my mind and had completely misremembered everything. I attended two different sessions—one before the law was even passed, and another on July 8th. Both times, for services provided to a major firm in Chicago, my notes explicitly stated "IPA - reverse charge."
I even called the consultants, and they gave me the exact same information.

Henry Edwards33 said:Thanks. You won't mind if I double-check this one more time, right?
The whole situation is starting to feel like a bad joke. 🤣

I actually went back through my notes from the training seminars because I honestly thought I was losing my mind and had completely misremembered everything. I attended two different sessions—one before the law was even passed, and another on July 8th. Both times, for services provided to a major firm in Chicago, my notes explicitly stated "IPA - reverse charge."
I even called the consultants, and they gave me the exact same information.

My bad, sorry! I was only asking about goods since I don't deal with services.
The funniest part is that on Reddit, where I consider the IMF's guidance to be "official," it explicitly states that reverse charge must be noted. It’s listed as recent news (in the News section, under the VAT topic from April 1st regarding business specifics with the UN after joining the UN—Part II—goods, imports, and exports, under point 1.1., dated June 14, 2013); I even quoted it in an earlier post.
It’s written so clearly there that there shouldn't be any doubt that it needs to be included😕 unless I'm just reading it wrong.

Benjamin Palmer80 said:Yesterday, we finally got a written response from the IRS stating that invoices for the USA should only include the exemption clause from the law or regulation, without mentioning reverse charge.

this is getting 🤣
And get this—on the official IRS FAQ pages, they actually say something totally different:

question:
When invoicing for transport services provided to a business entity in another state, should we include a "reverse charge" note or a transfer of tax liability?
answer:
The general principle regarding the place of taxation for services is established by Section 17, Subsection 1 of the Internal Revenue Code (which aligns with Article 44 of the VAT Directive), so for transport services, the invoice must specify that the tax liability has been transferred pursuant to Section 17, Subsection 1 of the Internal Revenue Code.

So, according to their own site, invoices for other states need that transfer note.

I fired off a few more questions about this mess today. Fingers crossed someone at the agency actually reads their emails and gets back to me.

VAT in tourism—I don't have any agencies in my portfolio, but I’m curious how the tax calculations are actually shaking out these days.
Up until now, sales tax was always calculated based on where the service provider was located—so when a domestic agency sent out an invoice:
$100.00 plus 10% sales tax to the local agency—simple enough.
$100.00 plus 10% sales tax for the local guest.
Paid an outside agency $100.00 plus 10% sales tax.
$100.00 plus 10% sales tax for an out-of-state guest.

Is this it?
The local agency gets $100.00—plus 10% sales tax.
The local guest gets $100.00 plus 10% sales tax. Simple as that.
To a foreign agency (B2B). $100,000 before tax.
Foreign guest (B2C): $100.00 + 10% sales tax.

So, I did a little digging on Google and stumbled upon this PowerPoint presentation.
The second I click the link, the whole thing just pops right up, and now I’m stuck because I have no clue how to actually embed the link itself 🤷 :zbunjena:

But here’s the deal:
http://www.google.com/#gs_rn=20&gs_ri...w=1024&bih=653

Just scroll down to that bottom link where it says (ppt) VAT effective July 1, 2013.pptx - Deloitte and that should trigger it.

Hope that makes sense, if it does... 🙈

ruggedmaker2 said:So, I did a little digging on Google and stumbled upon this PowerPoint presentation.
The second I click the link, the whole thing just pops right up, and now I’m stuck because I have no clue how to actually embed the link itself 🤷 :zbunjena:

But here’s the deal:
http://www.google.com/#gs_rn=20&gs_ri...w=1024&bih=653

Just scroll down to that bottom link where it says (ppt) VAT effective July 1, 2013.pptx - Deloitte and that should trigger it.

Hope that makes sense, if it does... 🙈

Maybe just right-click the link, select "Copy link address," and then you'll have it sitting right there in your clipboard. 🙂

I took a little break from dealing with sales tax, and now that I'm back at it, I feel like I've forgotten everything I thought I knew.

In this B2C scenario, my supplier is based in the USA, and the invoice they sent me looks like this:
- They’ve listed two different tax IDs—one for their US branch and one for their branch in Ireland. Each ID is tied to specific line items. In one instance, they applied a 25% tax rate, while the other shows 23%, and there's an "OR" between those sections, implying I can choose which one to pay.
- My own tax ID isn't actually listed on the invoice.
- The bill includes both the goods and the shipping costs.

How am I supposed to handle things if I use one tax ID versus the other? Specifically, how would I report this to the IRS depending on which route I take?

If I end up paying the amount associated with the US tax ID, does that mean I treat them like a domestic vendor? Am I allowed to claim that tax as an input credit?

On the other hand, if I pay the amount linked to the Irish tax ID with that 23% rate, what's the protocol there? Can I actually "deduct" that tax?

Or should I just ask them for an invoice without any tax applied, including my tax ID and noting it as a "reverse charge" (though I suppose they even bother writing "reverse charge" on invoices here)?

David Kelly37 said:The IRS told us the exact same thing at their seminar too—if you're dealing with a legal entity, the tax responsibility transfers to them, whether they're in the European Union or out of the country.

David Kelly37 said:The invoice has to be 100% in dollars, and you can't use reverse charge for exports.

Henry Edwards33 said:From what I gather, "reverse charge" can basically apply to any export within the European Union when dealing with a registered taxpayer. It’s just a way of saying the tax liability shifts, even if they should technically cite the specific legal code—but honestly, getting into that level of detail is just splitting hairs 😁

For services, I’ve double-checked everything from professional seminars to calling up consultants directly. Still, I’m going to go over it one more time (maybe two, maybe three) just to be sure. 😁

That was my takeaway from the seminar.
So, essentially, if we are providing services between two business taxpayers where one is American and the other is either from the USA or another foreign nation, the American side doesn't charge sales tax on their invoice; instead, they include a clause stating the tax liability has been transferred under Section 17, Paragraph 1.

However, if it involves the delivery of goods, you use the exemption clause under Section 41.

They repeated it to us three times: reverse charge is mandatory only for services and triangular transactions; everything else falls under an exemption.

The whole debate centered on whether invoices for freighting goods intended for export should strictly state "reverse charge" per Section 17, or if they also need to mention the VAT exemption under that specific export provision.

Wait, which seminar were you actually at?

Nicole Lee6 said:That was my takeaway from the seminar.
So, essentially, if we are providing services between two business taxpayers where one is American and the other is either from the USA or another foreign nation, the American side doesn't charge sales tax on their invoice; instead, they include a clause stating the tax liability has been transferred under Section 17, Paragraph 1.

However, if it involves the delivery of goods, you use the exemption clause under Section 41.

They repeated it to us three times: reverse charge is mandatory only for services and triangular transactions; everything else falls under an exemption.

The whole debate centered on whether invoices for freighting goods intended for export should strictly state "reverse charge" per Section 17, or if they also need to mention the VAT exemption under that specific export provision.

But then why does Section 79 (7) clearly state:
(7) In cases where the recipient of goods or services is liable for the sales tax, the provider must note "reverse charge" on the invoice.😕

Good grief, 🙂 I am officially done reading about sales tax. Not one more word. I’m not touching a single page of the tax code until the IRS sends me an official response via email. This is just making my head spin even more.

How would you all handle this specific scenario:

A small business owner here in California is providing roadside towing services. They invoice an agency based in a neighboring state that hired them to handle these interventions. Since it’s a straight B2B transaction, the business owner sends out invoices without sales tax. Throughout July, several calls came in (let's say one on July 2nd, three on July 14th, and another on July 16th). For every single tow, a separate invoice is issued within two days of the service being completed.

At the end of the month, the partner agency bundles all those individual towing invoices from the previous month together and issues a single invoice for a 10% commission based on the gross amount of the services rendered. Each line item on their bill corresponds to its own specific tow—so, one line per intervention. This invoice is dated August 7th, and it seems to me that these folks will include it in their aggregate filing for August (based on the issuance date).

I was under the impression that I should just use the Federal Reserve mid-market exchange rate for August 7th, convert the USD to my local currency, and then report both the tax liability and the input credit in my August sales tax return.

But then, I heard today that I actually have to report the liability and the credit at the moment the services are performed. If that's true, it implies I can't just convert the whole commission invoice at once; instead, I’d have to break it down. I’d have to calculate the portion of the commission related to the July 2nd tow using the exchange rate from July 2nd, the portion for those three calls on July 14th using the rate from July 14th, and so on. Or, perhaps the entire invoice could be converted using the Federal Reserve rate from July 31st, as the final day of the accounting period. Either way, following their logic, I would have to include this in my acquisition filings for July.

Now I’m left wondering about the relationship between the aggregate report they send over (the one where they list how many tax-free invoices were sent to the US via reverse charge) and the acquisition report we file here (which shows how many invoices we received from them for services). Aren't they supposed to be mirror images of each other? If they report it in August and we report it in July, what does that even make us? Honestly, who is making sense of this madness?!?

ruggedmaker2 said:Wait, which seminar were you actually at?

But then why does Section 79 (7) clearly state:
(7) In cases where the recipient of goods or services is liable for the sales tax, the provider must note "reverse charge" on the invoice.😕

Good grief, 🙂 I am officially done reading about sales tax. Not one more word. I’m not touching a single page of the tax code until the IRS sends me an official response via email. This is just making my head spin even more.

Patrick Peterson49
Hmm, they did mention that mandatory reverse charge applies to services and tripartite deals, but if we're talking about a delivery of goods, you don't list reverse charge—instead, it falls under the exemption per Section 41. Now, I think they briefly touched on some sort of "optional" reverse charge for certain goods deliveries, but honestly, kill me now; I really need to sleep this off. Maybe after a nap, it will all actually make sense.😢

For now, I’m just gonna stick with "reverse charge" for all my shipments to the USA... it doesn't say anywhere that I can't include that note—plus, Section 79 totally has my back 🙂
(7) When the recipient is responsible for paying the sales tax, the provider has to note "reverse charge" or the English term "reverse charge" on the invoice