Doing business with USA member states

Henry Edwards33 said:I’ve run into a bit of a headache 🤔 I called up some consultants today to double-check how they handle exchange rate differences for sole proprietors using cash accounting.

To me, this just doesn't add up. 🤷
I’d love to have a serious word with whoever came up with this and ask them where, exactly, those actual exchange rate losses or gains are supposed to go.
If you end up collecting less than expected, there's no logical way to claim it as revenue on the account just because the currency shifted against you. That flies right in the face of basic cash-basis accounting principles used by small business owners. It’s the same story if you receive more than what was invoiced.
I’d love to ask that consultant: where does that money actually land if it isn't recorded directly in the KPI as an income or expense item?

Henry Edwards33 said:To me, this just doesn't add up. 🤷
I’d love to have a serious word with whoever came up with this and ask them where, exactly, those actual exchange rate losses or gains are supposed to go.
If you end up collecting less than expected, there's no logical way to claim it as revenue on the account just because the currency shifted against you. That flies right in the face of basic cash-basis accounting principles used by small business owners. It’s the same story if you receive more than what was invoiced.
I’d love to ask that consultant: where does that money actually land if it isn't recorded directly in the KPI as an income or expense item?

The answer is simple: a sole proprietor records the amount in the MIT based on the mid-market exchange rate used on the day the funds actually hit the foreign currency account, strictly following cash basis accounting.

Now, here is the real headache for debate: how do we close out the IRA? Previously, it wasn't reported anywhere before payment, which basically allowed people to manipulate it and fudge the numbers to match their deposits. But now that it’s officially recorded and tied to specific filings, you can't just tinker with the issued invoice amounts anymore... so we're stuck.

It's the same story with expenses. You book them in the MIT using the mid-market rate on the day the transaction or the vendor invoice is processed. But wait—the problem arises because that same invoice might have already been logged in separate Green Party records using a different exchange rate to satisfy liability or tax withholding requirements. So, here’s the dilemma: how on earth are we supposed to close out the Green Party records when the totals don't match?

Fair questions. Personally, I record exchange rate differences on the day the payment hits because anything else is just extra paperwork for nothing. I didn't do it that way before, and I'm not starting now—I have no intention of keeping customer accounts open indefinitely over some tiny amount of change. The same goes if they pay more due to a favorable rate. That extra cash is real revenue, and I need to report it somewhere. 🤷

I’m not even going to touch the part about you digging through IRA records; that’s a whole different rabbit hole, and honestly, it shouldn't have been a topic to begin with. You just close out the issued IRA for the full amount, and then the exchange differences are handled separately as either income or an expense 😉
Looking at your situation, you had an export, and now you've got a shipment worth, say, $167. You actually collected $166. Previously, under tax-exempt exports, you should have listed $167, while putting the differences into the KPI.

If I've missed something, please set me straight. My ego can handle the correction 😬

One more thing—don't take everything you read on this Forum as gospel. Always double-check the facts with a pro 😉

Thanks to all the great people helping out here. I've learned a lot from you guys.

Edit:

Nicole Lee6 said:The answer is simple: a sole proprietor records the amount in the MIT based on the mid-market exchange rate used on the day the funds actually hit the foreign currency account, strictly following cash basis accounting.

Now, here is the real headache for debate: how do we close out the IRA? Previously, it wasn't reported anywhere before payment, which basically allowed people to manipulate it and fudge the numbers to match their deposits. But now that it’s officially recorded and tied to specific filings, you can't just tinker with the issued invoice amounts anymore... so we're stuck.

It's the same story with expenses. You book them in the MIT using the mid-market rate on the day the transaction or the vendor invoice is processed. But wait—the problem arises because that same invoice might have already been logged in separate Green Party records using a different exchange rate to satisfy liability or tax withholding requirements. So, here’s the dilemma: how on earth are we supposed to close out the Green Party records when the totals don't match?

That’s spot on, though I think our real struggle is figuring out how to actually execute it in the software.
Thinking it through, here is my logic 😁
If $498 landed in your account, that’s what you have to recognize as income, and that specific amount needs to show up in your KPI. Right?
You get that figure by closing out the customer's invoice for $167 (since they paid exactly that and you aren't going to chase them for $0.67 differences) and then you plug those $0.67 into the KPI as an expense. Long story short: the customer account is cleared in full, and you’ve recognized exactly $166. You just ran it through your accounting software in a way that generated an exchange difference. It’s the same with positive differences. If you received $167, you still have to account for that extra $2.00 somehow. You close the customer account for $167, and put the $2.00 in the KPI as income because, following cash principles, you actually collected $167, not $500.00. I think I might have just confused myself 🤔

Henry Edwards33 said:Fair questions. Personally, I record exchange rate differences on the day the payment hits because anything else is just extra paperwork for nothing. I didn't do it that way before, and I'm not starting now—I have no intention of keeping customer accounts open indefinitely over some tiny amount of change. The same goes if they pay more due to a favorable rate. That extra cash is real revenue, and I need to report it somewhere. 🤷

I’m not even going to touch the part about you digging through IRA records; that’s a whole different rabbit hole, and honestly, it shouldn't have been a topic to begin with. You just close out the issued IRA for the full amount, and then the exchange differences are handled separately as either income or an expense 😉
Looking at your situation, you had an export, and now you've got a shipment worth, say, $167. You actually collected $166. Previously, under tax-exempt exports, you should have listed $167, while putting the differences into the KPI.

If I've missed something, please set me straight. My ego can handle the correction 😬

One more thing—don't take everything you read on this Forum as gospel. Always double-check the facts with a pro 😉

Thanks to all the great people helping out here. I've learned a lot from you guys.

Edit:

That’s spot on, though I think our real struggle is figuring out how to actually execute it in the software.
Thinking it through, here is my logic 😁
If $498 landed in your account, that’s what you have to recognize as income, and that specific amount needs to show up in your KPI. Right?
You get that figure by closing out the customer's invoice for $167 (since they paid exactly that and you aren't going to chase them for $0.67 differences) and then you plug those $0.67 into the KPI as an expense. Long story short: the customer account is cleared in full, and you’ve recognized exactly $166. You just ran it through your accounting software in a way that generated an exchange difference. It’s the same with positive differences. If you received $167, you still have to account for that extra $2.00 somehow. You close the customer account for $167, and put the $2.00 in the KPI as income because, following cash principles, you actually collected $167, not $500.00. I think I might have just confused myself 🤔

That’s exactly how I handled things last year 🤷 but then this year they told me it doesn't fly for small business owners. Apparently, if they book using cash basis in the KPI, but they have to follow accrual when reporting income, they have to book it the way I described above. To make everything align, a small business owner would actually need to manage their IRA on a cash basis rather than an accrual basis based on issued invoices—those are just the specific details from the explanation I received 😬 so, I ended up neatly correcting the invoices upon receipt of payment to match the actual amount paid. Foreign clients don't care about the amount shown in USD; they just wanted me to note the informative amount in EUR, and all their payments were in EUR as I indicated through a note on the invoice. For myself, I just went through my records without that EUR note. I operated under the assumption that nobody was going to cross-reference the invoices in my books with those sent over to the branch in Mexico (and let me mention, this was back when invoices were still issued with sales tax, so the government was much more invested in making sure they got their cut)

Why? Because if, for example, I issued an invoice on September 1st converted to USD in the amount of $33, when I get paid on October 15th at the current daily exchange rate, it turns out I actually received $40. If I close the IRA with $33 and put $6.75 as income in the KPI, I’ve only given the government sales tax on $33, not on that extra 20.00. But I am legally required to give the government sales tax on $40 because that is my actual income from the payment, not $33.

So, what you do is you go back to that invoice, delete it, and create a new one with the same date and invoice number but a slightly different amount; say 96.00 + 24.00 = 120.00. You enter 120.00 into the payment table, and the government gets its lovely $8.00. That’s why I did it; I was practically forced down that path 🤣 and what can I say, I’m easily swayed 😂

EDIT: From what I could gather from her, the issue arises from the tax perspective of booking exchange rate differences as receipts—it essentially looks like you're shortchanging the government on their portion of the sales tax 🤔

Nicole Lee6 said:That’s exactly how I handled things last year 🤷 but then this year they told me it doesn't fly for small business owners. Apparently, if they book using cash basis in the KPI, but they have to follow accrual when reporting income, they have to book it the way I described above. To make everything align, a small business owner would actually need to manage their IRA on a cash basis rather than an accrual basis based on issued invoices—those are just the specific details from the explanation I received 😬 so, I ended up neatly correcting the invoices upon receipt of payment to match the actual amount paid. Foreign clients don't care about the amount shown in USD; they just wanted me to note the informative amount in EUR, and all their payments were in EUR as I indicated through a note on the invoice. For myself, I just went through my records without that EUR note. I operated under the assumption that nobody was going to cross-reference the invoices in my books with those sent over to the branch in Mexico (and let me mention, this was back when invoices were still issued with sales tax, so the government was much more invested in making sure they got their cut)

Why? Because if, for example, I issued an invoice on September 1st converted to USD in the amount of $33, when I get paid on October 15th at the current daily exchange rate, it turns out I actually received $40. If I close the IRA with $33 and put $6.75 as income in the KPI, I’ve only given the government sales tax on $33, not on that extra 20.00. But I am legally required to give the government sales tax on $40 because that is my actual income from the payment, not $33.

So, what you do is you go back to that invoice, delete it, and create a new one with the same date and invoice number but a slightly different amount; say 96.00 + 24.00 = 120.00. You enter 120.00 into the payment table, and the government gets its lovely $8.00. That’s why I did it; I was practically forced down that path 🤣 and what can I say, I’m easily swayed 😂

EDIT: From what I could gather from her, the issue arises from the tax perspective of booking exchange rate differences as receipts—it essentially looks like you're shortchanging the government on their portion of the sales tax 🤔

But your taxable delivery was actually $33, not 120.00 🤷

Forget about it; what's done is done and we can't get that time back. Let's just move on and keep learning. 😁

Henry Edwards33 said:But your taxable delivery was actually $33, not 120.00 🤷

Forget about it; what's done is done and we can't get that time back. Let's just move on and keep learning. 😁

Oh, please. I’m still sitting here dealing with invoices from before June 1st that show the sales tax, and honestly, I’ve been playing around with adjusting the previously issued invoice amounts to match whatever the exchange rate was on the actual payment date. ☕

By adjusting the taxable delivery to match the payment amount, I end up rolling those positive currency exchange gains into the total invoice amount, which effectively bumps up my sales tax liability. 😬 I mean, they probably won't complain—it's more money for them—and if they decide to come after me for it, they can go jump in a lake. 🙂:

On the flip side, if I receive less than expected, I have no idea how they’d react if I rolled those negative exchange differences into the total invoice amount to lower my sales tax obligation. 😂

But since July 1st, everything I had planned has gone completely out the window because my outgoing invoices don't include sales tax anymore. 😂 Now I have to scramble and come up with an entirely new strategy.

Henry Edwards33 said:Fair questions. Personally, I record exchange rate differences on the day the payment hits because anything else is just extra paperwork for nothing. I didn't do it that way before, and I'm not starting now—I have no intention of keeping customer accounts open indefinitely over some tiny amount of change. The same goes if they pay more due to a favorable rate. That extra cash is real revenue, and I need to report it somewhere. 🤷

I’m not even going to touch the part about you digging through IRA records; that’s a whole different rabbit hole, and honestly, it shouldn't have been a topic to begin with. You just close out the issued IRA for the full amount, and then the exchange differences are handled separately as either income or an expense 😉
Looking at your situation, you had an export, and now you've got a shipment worth, say, $167. You actually collected $166. Previously, under tax-exempt exports, you should have listed $167, while putting the differences into the KPI.

If I've missed something, please set me straight. My ego can handle the correction 😬

One more thing—don't take everything you read on this Forum as gospel. Always double-check the facts with a pro 😉

Thanks to all the great people helping out here. I've learned a lot from you guys.

Edit:

That’s spot on, though I think our real struggle is figuring out how to actually execute it in the software.
Thinking it through, here is my logic 😁
If $498 landed in your account, that’s what you have to recognize as income, and that specific amount needs to show up in your KPI. Right?
You get that figure by closing out the customer's invoice for $167 (since they paid exactly that and you aren't going to chase them for $0.67 differences) and then you plug those $0.67 into the KPI as an expense. Long story short: the customer account is cleared in full, and you’ve recognized exactly $166. You just ran it through your accounting software in a way that generated an exchange difference. It’s the same with positive differences. If you received $167, you still have to account for that extra $2.00 somehow. You close the customer account for $167, and put the $2.00 in the KPI as income because, following cash principles, you actually collected $167, not $500.00. I think I might have just confused myself 🤔

You think you've tangled things up, but that's just how I've always done it! 😁
Even if it is messy, it seems perfectly logical to me to reduce collections down to basic cash basis accounting.
I haven't dealt with a VAT calculation case personally (everything was export services, which are exempt from VAT). But even if I had, I’d keep doing it this way, because it isn't impossible to run the exchange difference through the IRA (+ or -) and close out the payment.
(Original invoice + exchange difference = cash basis, and the government gets its VAT).

On paper, at least when you look at the billing... 😍

Henry Edwards33 said:Fair questions. Personally, I record exchange rate differences on the day the payment hits because anything else is just extra paperwork for nothing. I didn't do it that way before, and I'm not starting now—I have no intention of keeping customer accounts open indefinitely over some tiny amount of change. The same goes if they pay more due to a favorable rate. That extra cash is real revenue, and I need to report it somewhere. 🤷

I’m not even going to touch the part about you digging through IRA records; that’s a whole different rabbit hole, and honestly, it shouldn't have been a topic to begin with. You just close out the issued IRA for the full amount, and then the exchange differences are handled separately as either income or an expense 😉
Looking at your situation, you had an export, and now you've got a shipment worth, say, $167. You actually collected $166. Previously, under tax-exempt exports, you should have listed $167, while putting the differences into the KPI.

If I've missed something, please set me straight. My ego can handle the correction 😬

One more thing—don't take everything you read on this Forum as gospel. Always double-check the facts with a pro 😉

Thanks to all the great people helping out here. I've learned a lot from you guys.

Edit:

That’s spot on, though I think our real struggle is figuring out how to actually execute it in the software.
Thinking it through, here is my logic 😁
If $498 landed in your account, that’s what you have to recognize as income, and that specific amount needs to show up in your KPI. Right?
You get that figure by closing out the customer's invoice for $167 (since they paid exactly that and you aren't going to chase them for $0.67 differences) and then you plug those $0.67 into the KPI as an expense. Long story short: the customer account is cleared in full, and you’ve recognized exactly $166. You just ran it through your accounting software in a way that generated an exchange difference. It’s the same with positive differences. If you received $167, you still have to account for that extra $2.00 somehow. You close the customer account for $167, and put the $2.00 in the KPI as income because, following cash principles, you actually collected $167, not $500.00. I think I might have just confused myself 🤔

Richard Howard55 said:You think you've tangled things up, but that's just how I've always done it! 😁
Even if it is messy, it seems perfectly logical to me to reduce collections down to basic cash basis accounting.
I haven't dealt with a VAT calculation case personally (everything was export services, which are exempt from VAT). But even if I had, I’d keep doing it this way, because it isn't impossible to run the exchange difference through the IRA (+ or -) and close out the payment.
(Original invoice + exchange difference = cash basis, and the government gets its VAT).

🤔 That crossed my mind, but I have no idea how one would actually implement it... I don't have a specific account for exchange rate differences... so on what basis would I even open an IRA? The invoices sent out included VAT (for domestic transport), but there were also combinations where part of the invoice was non-taxable (where the transport route was partly domestic and partly international).

Honestly, after sleeping on it, I think I’m going back to my old ways.
Up until this year, I’ve been recording exchange rate differences through receipts. Essentially, I’d open an IRA at the daily rate, then close that IRA upon payment, and any difference between that and the actual payment date rate would be recorded as a receipt on the checking account—positive if it was a gain, negative if it was a loss.

I only started messing around with adjusting the IRA amounts to match the exact payments this year because my advisor insisted that the IRA should follow the cash basis principle. But that totally threw off my chronological order—I used to enter invoices as soon as they were issued. And man, did I get tangled up... it happened that part of an invoice was settled via compensation, while the rest was paid in USD to the checking account the following month, and suddenly my whole reconciliation system just fell apart...

Looking back at what lili wrote about recording them as expenses (I assume in kind), I realized I was completely wrong in how I booked negative exchange differences (I was treating them as negative receipts on the checking account). I really ought to fix this in my books; wouldn't that be the better way to handle it?

Also, one more thing: if I receive a single payment covering multiple invoices, should I record the exchange rate differences as separate line items in the KPI for each individual invoice, or just bundle the total difference into one single KPI entry?

Frankly, I can't wrap my head around this advisor's claim that exchange rate differences don't exist for sole proprietorships... they definitely exist for corporations, but apparently not for small businesses according to her. 🤔 Before July 1st, I could still sort of fudge things with the IRAs and reconcile the totals, but since July 1st, I can't, because everything goes straight into the ZP, which brings me right back to the same old headache regarding exchange differences. Up until July, I only dealt with differences based on the IRA, but now I have to deal with them based on the URA too...

In my opinion, from July 1st onward, exchange rate differences become absolutely unavoidable for small businesses as well—unless the customer pays the exact amount in USD, in which case there's no gap. But as soon as they pay in a different currency, there's a discrepancy. I have all sorts of customers; some pay the exact dollar amount, but others (even from the same country!) insist they can't pay in USD because it isn't their official currency. 🙄

Nicole Lee6 said:That’s exactly how I handled things last year 🤷 but then this year they told me it doesn't fly for small business owners. Apparently, if they book using cash basis in the KPI, but they have to follow accrual when reporting income, they have to book it the way I described above. To make everything align, a small business owner would actually need to manage their IRA on a cash basis rather than an accrual basis based on issued invoices—those are just the specific details from the explanation I received 😬 so, I ended up neatly correcting the invoices upon receipt of payment to match the actual amount paid. Foreign clients don't care about the amount shown in USD; they just wanted me to note the informative amount in EUR, and all their payments were in EUR as I indicated through a note on the invoice. For myself, I just went through my records without that EUR note. I operated under the assumption that nobody was going to cross-reference the invoices in my books with those sent over to the branch in Mexico (and let me mention, this was back when invoices were still issued with sales tax, so the government was much more invested in making sure they got their cut)

Why? Because if, for example, I issued an invoice on September 1st converted to USD in the amount of $33, when I get paid on October 15th at the current daily exchange rate, it turns out I actually received $40. If I close the IRA with $33 and put $6.75 as income in the KPI, I’ve only given the government sales tax on $33, not on that extra 20.00. But I am legally required to give the government sales tax on $40 because that is my actual income from the payment, not $33.

So, what you do is you go back to that invoice, delete it, and create a new one with the same date and invoice number but a slightly different amount; say 96.00 + 24.00 = 120.00. You enter 120.00 into the payment table, and the government gets its lovely $8.00. That’s why I did it; I was practically forced down that path 🤣 and what can I say, I’m easily swayed 😂

EDIT: From what I could gather from her, the issue arises from the tax perspective of booking exchange rate differences as receipts—it essentially looks like you're shortchanging the government on their portion of the sales tax 🤔

I always assumed that for a sole proprietor, you didn't recalculate the VAT on exchange differences. I'm asking because I genuinely don't know: are corporations required to pay VAT on the gains made from positive exchange rate differences?

Nicole Lee6 said:🤔 That crossed my mind, but I have no idea how one would actually implement it... I don't have a specific account for exchange rate differences... so on what basis would I even open an IRA? The invoices sent out included VAT (for domestic transport), but there were also combinations where part of the invoice was non-taxable (where the transport route was partly domestic and partly international).

Honestly, after sleeping on it, I think I’m going back to my old ways.
Up until this year, I’ve been recording exchange rate differences through receipts. Essentially, I’d open an IRA at the daily rate, then close that IRA upon payment, and any difference between that and the actual payment date rate would be recorded as a receipt on the checking account—positive if it was a gain, negative if it was a loss.

I only started messing around with adjusting the IRA amounts to match the exact payments this year because my advisor insisted that the IRA should follow the cash basis principle. But that totally threw off my chronological order—I used to enter invoices as soon as they were issued. And man, did I get tangled up... it happened that part of an invoice was settled via compensation, while the rest was paid in USD to the checking account the following month, and suddenly my whole reconciliation system just fell apart...

Looking back at what lili wrote about recording them as expenses (I assume in kind), I realized I was completely wrong in how I booked negative exchange differences (I was treating them as negative receipts on the checking account). I really ought to fix this in my books; wouldn't that be the better way to handle it?

Also, one more thing: if I receive a single payment covering multiple invoices, should I record the exchange rate differences as separate line items in the KPI for each individual invoice, or just bundle the total difference into one single KPI entry?

Frankly, I can't wrap my head around this advisor's claim that exchange rate differences don't exist for sole proprietorships... they definitely exist for corporations, but apparently not for small businesses according to her. 🤔 Before July 1st, I could still sort of fudge things with the IRAs and reconcile the totals, but since July 1st, I can't, because everything goes straight into the ZP, which brings me right back to the same old headache regarding exchange differences. Up until July, I only dealt with differences based on the IRA, but now I have to deal with them based on the URA too...

In my opinion, from July 1st onward, exchange rate differences become absolutely unavoidable for small businesses as well—unless the customer pays the exact amount in USD, in which case there's no gap. But as soon as they pay in a different currency, there's a discrepancy. I have all sorts of customers; some pay the exact dollar amount, but others (even from the same country!) insist they can't pay in USD because it isn't their official currency. 🙄

I always assumed that for a sole proprietor, you didn't recalculate the VAT on exchange differences. I'm asking because I genuinely don't know: are corporations required to pay VAT on the gains made from positive exchange rate differences?

Of course not. It’s a non-issue. Neither interest nor exchange rate fluctuations are subject to tax at all.
Just look at Article 2 of the VAT regulations:
Article 2.
The scope of taxation includes every supply of goods or performance of services within the domestic territory for consideration, the acquisition of goods within the European Union by persons defined in Article 4, Section 1, Point 2 of the Law, and the import of goods if all other conditions prescribed by the Law are met.

An exchange rate difference isn't a supply of goods, and it sure as hell isn't a service. Same goes for interest. 😉

A negative exchange rate difference is just an expense, and a positive one is revenue.

ruggedmaker2 said:Of course not. It’s a non-issue. Neither interest nor exchange rate fluctuations are subject to tax at all.
Just look at Article 2 of the VAT regulations:
Article 2.
The scope of taxation includes every supply of goods or performance of services within the domestic territory for consideration, the acquisition of goods within the European Union by persons defined in Article 4, Section 1, Point 2 of the Law, and the import of goods if all other conditions prescribed by the Law are met.

An exchange rate difference isn't a supply of goods, and it sure as hell isn't a service. Same goes for interest. 😉

A negative exchange rate difference is just an expense, and a positive one is revenue.

Just one more thing regarding interest, based on how the IRS interprets things:

Interest is considered compensation for a financing service, so when we're talking about interest charged domestically, it's not subject to VAT according to Article 40, Section 1, subsection b, because that service is exempt under the law.

But, if our business owner grants a loan and charges interest to a business within the European Union, then that article doesn't apply. We're looking at banking and financial services that aren't listed as exemptions, so they get taxed based on one of two fundamental principles used to determine where a service is taxed, depending on the recipient's tax status:

1) B2B - the place of taxation is where the recipient is located (per Article 17, Section 1, you mark it as "reverse charge" on the invoice)

2) B2C - the place of taxation is where the business performing the service is located (according to this interpretation, if you're granting a loan to an individual, you'd actually have to charge American VAT on the interest invoice)

I’m begging anyone with a soul—and please, just don't give me that "go read the tax code" nonsense—to tell me if I need to charge VAT when I'm hauling goods from Washington, D.C. to Buffalo for a company based in the European Union that's already registered for VAT. If I don't have to, which specific section of the law covers that?

Also, does anyone know which part of the law applies when I'm exporting goods to Mexico to a registered taxpayer?

Thanks in advance!🙂

Drew Rogers6 said:I’m begging anyone with a soul—and please, just don't give me that "go read the tax code" nonsense—to tell me if I need to charge VAT when I'm hauling goods from Washington, D.C. to Buffalo for a company based in the European Union that's already registered for VAT. If I don't have to, which specific section of the law covers that?

Also, does anyone know which part of the law applies when I'm exporting goods to Mexico to a registered taxpayer?

Thanks in advance!🙂

We're talking about a transport service within the European Union performed by an American taxpayer for a business located in another member state. The standard rule applies here: the place of supply is where the recipient's headquarters are located. An American taxpayer shouldn't charge VAT on the invoice and should include a note stating the tax liability is being transferred under Section 17, Subsection 1 of the VAT law.
You also need to log this in the ZP form under "Services performed within the EU"

When you're exporting goods to Mexico, that's considered an export exempt from VAT under Section 45, Subsection 1, item 1. On the invoice, you just write "Exempt from VAT per Section 45, Subsection 1."]

Jeremy Anderson63 said:We're talking about a transport service within the European Union performed by an American taxpayer for a business located in another member state. The standard rule applies here: the place of supply is where the recipient's headquarters are located. An American taxpayer shouldn't charge VAT on the invoice and should include a note stating the tax liability is being transferred under Section 17, Subsection 1 of the VAT law.
You also need to log this in the ZP form under "Services performed within the EU"

When you're exporting goods to Mexico, that's considered an export exempt from VAT under Section 45, Subsection 1, item 1. On the invoice, you just write "Exempt from VAT per Section 45, Subsection 1."]

🙂

heh, looks like everyone's having a blast with the sales tax and VAT filings, but did anyone run into issues with intra-community transactions? That stuff has to line up perfectly with the monthly tax totals—basically the invoice value—(so all those little tweaks people try to make with adjusting VAT or sales tax sometimes just fall apart because of how intra-state reporting works)

anyway, this whole situation feels pretty ripe for a solid 'rebalance'—pardon me, an audit😍

then there's the thing where invoices get recorded once the goods actually arrive, regardless of what the invoice date says, and so on... mostly because of how intra-state rules play out

Honestly, nobody is pure anymore...

The other day, I asked my advisor about a situation involving an invoice issued on July 31st to a partner in Germany (it was included in the sales tax and excise reports for July). I didn't get a response until October 10th, and now they’re demanding I report the invoice with sales tax applied instead of using the transfer mechanism. So, what am I supposed to do? She tells me I have to void the original one on October 10th and issue a new one dated October 10th. But then she says I also need to generate a new excise report for July—though she wasn't entirely sure about the sales tax part since the total amount on the sales tax form won't change. Since I run my business on a cash basis, that newly issued invoice won't even hit the sales tax report until it's actually paid. However, field I.4. has to match the sum of the excise report, so I guess I have to redo everything for July from scratch. Because my accounting software doesn't support this (voiding pulls the entry based on the void date for both excise and sales tax), I’ll have to manually fix July first, and then I'll have to repeat the whole mess again in November. 🙂It’s easy for me because I only have one such invoice right now, but imagine the people who deal with multiple rounds of approvals or whatever on invoices issued back in July. How many times can they keep resubmitting excise reports for July before the IRS starts looking at them suspiciously? Like, how many times are you allowed to "correct" the exact same month? 🤣

On the flip side, I received an incoming invoice for brokerage services during August, but the invoice itself is dated September 10th. I decided to just push everything into September. My advisor tells me, "No, that invoice goes into the August sales tax filing, the liability is reported as of August 31st, and you claim the input credit immediately." I was totally confused because the invoice is dated September 10th, so I figured I couldn't use the input credit until September. He argued that since the August sales tax forms haven't been filed yet, you've already received the invoice. 🤔I told him I wanted to move everything to September so that my sales tax and excise reports would align perfectly with what the partner submits, since they’ll be putting that invoice in their September excise report based on the invoice date. I was just following their logic! To that, he just said, "Fine, then put it all in September and let the IRS weigh in on the matter whenever they feel like it." 😕

Hey, quick beginner question here. What’s actually the difference between shipping goods to other countries within the USA versus just moving stuff around within the States?

http://www.irs.gov/tax-topics/vat-eu-regulations/....06.2013.).pdf

Long story short:

Shipping goods to other European Union countries:
- You’re looking at delivering goods or services to another DC where the VAT obligation kicks in. This happens because the supplier hit that specific sales threshold set by that country, or they just decided to waive the limit entirely and register for VAT there on purpose.

Moving goods within the European Union:
- Data regarding tax-exempt shipments made to taxpayers who are already registered for VAT in other DC territories.
- Details on those messy three-way transaction deals.
- Moving inventory around.
- The total value of goods shipped to other European Union nations under customs procedures 42 and 63.

Thanks!

I suppose I should ask, does the acquisition of goods or services from third-party countries also require being recorded in a separate ledger??