Doing business with USA member states

Alexander Morgan33 said:I need to head over to an Unknown in Austin to pick up some furniture for the office. They’re going to charge me their local sales tax on the purchase. When we record this in our books, do we need to account for our own state sales tax too?
Someone mentioned that we pay the local tax at the store, and then we just calculate the difference to hit our 25% rate here at home. Is that how it works?

Does anyone know the actual process?

Look, if your company is registered for sales tax, there's no local tax to worry about. You just handle the tax accounting right here in the States and claim your input credit immediately.
All you have to do is give them your company's Tax ID so they can verify through the IRS that you're a legitimate business entity here in America.
If you're the one driving the goods back yourself, you'll need to provide some kind of proof that the stuff is actually leaving the state and heading across the border into another part of the country.

Now, if you buy the stuff without using a Tax ID, you're stuck paying the local tax upfront, but you still have the right to request a refund:
http://www.irs.gov/Tax-ID-Refund-Process

For those who care, but probably don't...
A clerk at the local police department—no, wait, let's just say some bureaucrat at the local precinct--is claiming the VAT deadline is the 30th or 31st of the month, regardless of the fact that the actual filing deadline is the 20th.
Also, if you were previously on a quarterly schedule and they finally assign you a specific tax ID, you're officially bumped up to a monthly filer. 🙂

Is there actually a minimum amount you have to hit if you're trying to get a refund on sales tax paid while traveling in another state?
I feel like I read some specific number somewhere once, but honestly, my memory is shot and I couldn't find anything useful on the IRS website either. Either I'm totally missing it, or everything online is just a giant, confusing mess. 😵

Like, could I realistically try to claim a $60 refund for sales tax I paid in Texas on hotel stays and gas?

ugh, anyone else notice how much they totally overcomplicate things with these sales tax forms? Like, having the VAT return, the summary report, and the excise tax filings all at once feels so redundant. For services taxed at 100%, they even say in the instructions 😵 that everything has to match—so why bother? And I haven't even figured out where the distinction is supposed to be for goods yet—like, when does something go on the main tax return versus those other two forms?

The main tax form has like ten extra line items that just make everything way more confusing than it needs to be. 😍 I mean, they already have all that data on the summary and excise reports anyway—you know, all the stuff about acquiring assets, imports from overseas, or exports to international markets.

ruggedmaker2 said:Is there actually a minimum amount you have to hit if you're trying to get a refund on sales tax paid while traveling in another state?
I feel like I read some specific number somewhere once, but honestly, my memory is shot and I couldn't find anything useful on the IRS website either. Either I'm totally missing it, or everything online is just a giant, confusing mess. 😵

Like, could I realistically try to claim a $60 refund for sales tax I paid in Texas on hotel stays and gas?

So, I’m looking through my seminar notes—just some quick scribbles I jotted down;
The minimum amount for a VAT refund depends on the filing period;
-for a period between 3 months and 1 year, the minimum is $400
-for a full calendar year, the minimum is $50

However, I have a nagging feeling they were specifically talking about foreign nationals requesting refunds here in the States. They mentioned certain sections of the regulations governing this, but I didn't manage to write down which ones specifically.😢 It's entirely possible that for refunds from other states, you'd need to contact their local authorities directly...

But none of this matters until that new portal on our tax agency's site actually goes live for submitting claims (the VAT refund system)—unless, of course, that's already up and running.🤔

Also, it was mentioned that for things like fuel receipts, you'll likely need to provide copies of any invoices exceeding $250.

P.S. How should a sole proprietor record a fuel receipt from a neighboring state where VAT is shown? Should it be booked under revenue or as an expense, and do you report the total amount or just the base price without the VAT? This is assuming they aren't planning to claim a VAT refund.

Ashley Ramirez4 said:ugh, anyone else notice how much they totally overcomplicate things with these sales tax forms? Like, having the VAT return, the summary report, and the excise tax filings all at once feels so redundant. For services taxed at 100%, they even say in the instructions 😵 that everything has to match—so why bother? And I haven't even figured out where the distinction is supposed to be for goods yet—like, when does something go on the main tax return versus those other two forms?

The main tax form has like ten extra line items that just make everything way more confusing than it needs to be. 😍 I mean, they already have all that data on the summary and excise reports anyway—you know, all the stuff about acquiring assets, imports from overseas, or exports to international markets.

I suppose true redundancy would be having two identical values on the exact same form. This doesn't really fit that definition. These are entirely separate documents used for different types of record-keeping and serve distinct purposes; for instance, I believe the supplemental report must be filed even by those not registered for sales tax, whereas the main return isn't required for them.

Nicole Lee6 said:So, I’m looking through my seminar notes—just some quick scribbles I jotted down;
The minimum amount for a VAT refund depends on the filing period;
-for a period between 3 months and 1 year, the minimum is $400
-for a full calendar year, the minimum is $50

However, I have a nagging feeling they were specifically talking about foreign nationals requesting refunds here in the States. They mentioned certain sections of the regulations governing this, but I didn't manage to write down which ones specifically.😢 It's entirely possible that for refunds from other states, you'd need to contact their local authorities directly...

But none of this matters until that new portal on our tax agency's site actually goes live for submitting claims (the VAT refund system)—unless, of course, that's already up and running.🤔

Also, it was mentioned that for things like fuel receipts, you'll likely need to provide copies of any invoices exceeding $250.

P.S. How should a sole proprietor record a fuel receipt from a neighboring state where VAT is shown? Should it be booked under revenue or as an expense, and do you report the total amount or just the base price without the VAT? This is assuming they aren't planning to claim a VAT refund.

Anyway, I checked in with the IRS. Turns out, if there’s even a minimum threshold for these things, it's up to each individual state or country to set the rules. Like, before I go chasing a tax refund from somewhere like Canada, I actually have to look up how Canada handles their own business first.
But hey, no rush. I've got nothing but time... I'll probably get around to it by the end of the year. 😁

Zachary White17 said:I suppose true redundancy would be having two identical values on the exact same form. This doesn't really fit that definition. These are entirely separate documents used for different types of record-keeping and serve distinct purposes; for instance, I believe the supplemental report must be filed even by those not registered for sales tax, whereas the main return isn't required for them.

Look, I never said there was an issue with having two new forms. My point is about the Sales Tax form itself—it feels unnecessarily bloated when everything listed in those specific rows is already captured by the totals on these two other forms. Honestly, those new ones are even more detailed. I just don't see why we're making the main Sales Tax form so complicated when all that data is pulled from these two extra filings anyway. Like, what's the point? Just to see how much fake volume went through at a specific rate? Even the outgoing invoice tax doesn't really give you that level of detail.

I missed my sales tax filing deadline—I honestly had no idea it was due by the 20th! Does this apply to the June filing, or am I going to get hit with a penalty?

Terry Barrett33 said:I missed my sales tax filing deadline—I honestly had no idea it was due by the 20th! Does this apply to the June filing, or am I going to get hit with a penalty?

June follows the old schedule; the 20th deadline actually applies to July's filings, meaning you're looking at August 20th...

ruggedcyclist74 said:June follows the old schedule; the 20th deadline actually applies to July's filings, meaning you're looking at August 20th...

Well, I certainly broke a sweat reading that one. Thanks for the workout!

Terry Barrett33 said:Well, I certainly broke a sweat reading that one. Thanks for the workout!

I wouldn't advise doing that to yourself; it’s already blistering hot enough out there as it is.😉

Patrick Peterson49 said: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

Hopefully this is the last time I have to talk about reverse charge, but only regarding goods. Today—for the hundredth time—I called the IRS to ask for a little clarification on why we use or don't use reverse charge on invoices for the USA, and the agent just politely told me, "Ma'am, I don't know what you're struggling with." Look, you can't transfer tax liability if you have an exemption under Section 41 or 45. If there's an exemption, there's simply no tax to transfer! You only shift the tax obligation to the buyer if you actually have a tax liability to begin with (like with certain services), and even then, for physical goods, it's usually limited to specific three-party transactions. 😕

So, I finally got some feedback from the IRS regarding the reverse charge situation. It was just a quick verbal heads-up for now, but I sent off an official email, so I’m waiting on the formal paperwork to hit my inbox.
Apparently, they told me the same thing they told Voyageur—for those standard goods delivery invoices under Section 41, you don't apply the reverse charge. That only kicks in for specific service-based invoices.

Heh, well, I guess I'm officially one step closer to actually understanding this tax nightmare 😁

So, here’s my take on the whole "reverse charge" thing...

We just had an invoice sent back to us from the USA, and they're asking me to include specific wording like "reverse charge procedure according to US Code"

We already invoiced them for the service.

So, my question is:

How am I supposed to know which specific code to cite? It seems like just writing "reverse charge" isn't quite enough.
I mean, when companies over here send us goods or bill us for services, they always seem to reference all sorts of different regulations—you know, things like the 2008/8 or 2006/112 ones (which I think covers everything related to physical goods, like equipment rentals or repairs and stuff).

Also, just to make sure I've got this straight—if a service is tax-exempt, does that mean we don't use the reverse charge at all?

Thanks so much in advance for any help!

Man, you gotta be kidding me, that makes zero sense 🤷

If the customer or service recipient is the one on the hook for the sales tax, the vendor has to mark the invoice with "reverse charge" or just write out "tax liability transfer"

So if I'm shipping goods to a business in the USA, they’re the ones responsible for the tax—per Section 79, Article 7, I’ve gotta put "reverse charge" on there...

Same thing happened when I was bringing in supplies from Italy lately—both my suppliers labeled everything as reverse charge on their invoices

Patrick Peterson49 said:Man, you gotta be kidding me, that makes zero sense 🤷

If the customer or service recipient is the one on the hook for the sales tax, the vendor has to mark the invoice with "reverse charge" or just write out "tax liability transfer"

So if I'm shipping goods to a business in the USA, they’re the ones responsible for the tax—per Section 79, Article 7, I’ve gotta put "reverse charge" on there...

Same thing happened when I was bringing in supplies from Italy lately—both my suppliers labeled everything as reverse charge on their invoices

Meanwhile, I’ve been bringing in stock from Canada and Austria, and not a single one of them uses reverse charge. Not even close.
Here’s what I’m looking at:
The Canadian invoice says: VAT not charged based on Section 1, Article 46 of the US Tax Code.
And
The Austrian one reads: Intra-community tax-free delivery.

😁
God, I love the European Union. 🤣

ruggedmaker2 said:So, I finally got some feedback from the IRS regarding the reverse charge situation. It was just a quick verbal heads-up for now, but I sent off an official email, so I’m waiting on the formal paperwork to hit my inbox.
Apparently, they told me the same thing they told Voyageur—for those standard goods delivery invoices under Section 41, you don't apply the reverse charge. That only kicks in for specific service-based invoices.

Heh, well, I guess I'm officially one step closer to actually understanding this tax nightmare 😁

Well, that aligns perfectly with what they drilled into our heads at the seminar. Let me scroll back down to my previous post... reverse charge only kicks in for services (the so-called "mandatory" transfer and triangular transactions). When it comes to delivering goods, the reverse charge doesn't apply because the invoice doesn't show tax based on a transfer, but rather based on an exemption; that's why you cite the text "exempt from tax per Section 41."

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.

Karen Smith34 said:So, here’s my take on the whole "reverse charge" thing...

We just had an invoice sent back to us from the USA, and they're asking me to include specific wording like "reverse charge procedure according to US Code"

We already invoiced them for the service.

So, my question is:

How am I supposed to know which specific code to cite? It seems like just writing "reverse charge" isn't quite enough.
I mean, when companies over here send us goods or bill us for services, they always seem to reference all sorts of different regulations—you know, things like the 2008/8 or 2006/112 ones (which I think covers everything related to physical goods, like equipment rentals or repairs and stuff).

Also, just to make sure I've got this straight—if a service is tax-exempt, does that mean we don't use the reverse charge at all?

Thanks so much in advance for any help!

At the seminar, they mentioned that some business partners might request that we cite the specific article from the Executive Order that pertains to the exemption. Usually, you just cite our own domestic law (since it's aligned with the Executive Order), but since foreign entities aren't expected to be experts in our local statutes—even though everyone knows the Executive Order—they might demand that we reference the corresponding article from the Executive Order instead. Which is exactly what happened to you.😬

Patrick Peterson49 said:Man, you gotta be kidding me, that makes zero sense 🤷

If the customer or service recipient is the one on the hook for the sales tax, the vendor has to mark the invoice with "reverse charge" or just write out "tax liability transfer"

So if I'm shipping goods to a business in the USA, they’re the ones responsible for the tax—per Section 79, Article 7, I’ve gotta put "reverse charge" on there...

Same thing happened when I was bringing in supplies from Italy lately—both my suppliers labeled everything as reverse charge on their invoices

It’s possible their specific laws define this slightly differently. For instance, back when companies in Canada were billing me for services while we were considered a third-party country, they didn't bother mentioning the transfer of tax liability—they'd just note that tax wasn't charged per some specific code. But now that we are part of the European Union, they explicitly list "reverse charge." Unlike them, we apply the "reverse charge" designation to everything, whether the invoice is going to the European Union or to a third-party country.

I’m really hoping someone in this thread actually has a clue, because the consultants over at the IRS have been absolutely useless—honestly, they haven't given me a straight answer to save their lives.
We’re looking at some kind of "non-standard" three-way deal here:

The goods are coming out of Germany, passing through the US, and heading straight into Canada.
The German supplier issues us an invoice for the goods, and then we issue our own invoice to the client in Canada.
Crucially, the shipment doesn't even get unloaded while it's sitting in the US; it just moves right through.
So, who is responsible for what?
I’ve got two different scenarios playing out: in one instance, the German company handled the export customs clearance (since the goods are leaving the European Union), but in the other, they’re telling me *we* have to handle it.

When exactly should we be calculating VAT on the acquisition? Or rather, when shouldn't we? And does this count as an export for us in either of these cases?
What exactly is being done wrong here?

This used to be a straightforward re-export back in the day. But under the current rules... what even is it now? 🤷

ruggedmaker2, you don't get to call this a three-way deal because Canada isn't even in the European Union.
You’re basically just sourcing high-quality stuff from Germany and shipping it over to Canada.

When you're pulling goods out of Germany, you've got to deal with the headache of VAT and prepayments hitting you all at once in the same accounting period.
Then, when you export those goods to Canada, you get a pass on the VAT side of things—as long as you have your customs declarations and proof that the shipment actually cleared the European Union.