Doing business with USA member states

Ryan Wilson2 said:I am requesting some clarification from the experts here:

"Final Proposal for Amendments to the Sales Tax Law"

Article 79.

The invoice must include the following information:

Paragraph 6.

the unit price excluding sales tax, specifically the amount of compensation for goods delivered or services
rendered, categorized by sales tax rate

If my interpretation of this language is correct, does this imply that every single line item on a restaurant receipt must now explicitly list its individual price before sales tax is applied?

I’m no expert, but since I’m just as curious about this as you are, I’ll throw out my own thoughts and wait for the pros to weigh in.
Here is how I see it:
Under the new Value Added Tax Act, there's only the "standard" invoice (per current Article 15). A simplified cash register receipt—for things like retail or hospitality, I assume—doesn't need all that detail; those follow the standard rules for simple receipts where the required content is already defined.

Sure, you could issue a "full" invoice, but the prices would start looking totally skewed, shifting left to right. Like, if a steak costs, say, $17, how do you even explain that to a customer?

Let me know what you think the proper way should be.

silverviper44 said:Does anyone here actually know how the billing process works for this kind of thing?

For example, I run a business here in the States (Company A), and I strike a deal with a firm based in Germany (Company B) to handle some installation work over there.

In that scenario, am I supposed to invoice them with sales tax included or leave it off?

I know for a fact that in Germany, Company A wouldn't charge sales tax to Company B, since Company B is selling the product to the end consumer who pays the tax, which they then remit to the government.

I honestly think when you're looking at these assembly setups, the delivery location is everything. It changes the whole math. According to Article 17:

Look, I’m telling you, the tax man keeps it simple, even if it feels like they’re trying to trip you up. Basically, where you actually do the work doesn't matter nearly as much as where that business is officially parked. If you're providing services to a business client, the place where they're legally headquartered is what counts as the service location. It's all about that official headquarters address. Simple as that, though I'm sure there's some fine print somewhere designed to make our lives miserable.
If you were in my shoes, you'd be looking at a place like Germany.
Look, here’s the deal with the tax side of things. If you sell a product and then head over to install it yourself, you aren't charging VAT on the actual item—they handle their own input tax credits on that end. But that installation service? That's a different beast entirely. To stay legal on the service side, you’d actually need to get yourself registered for VAT in Germany. It's just one of those bureaucratic headaches that keeps you up at night.
That’s how it looks from where I'm sitting. I mean, I'm not one hundred percent sure yet. Still waiting on that seminar to kick off—again. Honestly, if I have to sit through one more of these endless training sessions just to get my head around the paperwork, I might actually lose it. 😵And that whole regulation thing too. Everything's just one giant mess of red tape. 😁

Ryan Wilson2 said:I am requesting some clarification from the experts here:

"Final Proposal for Amendments to the Sales Tax Law"

Article 79.

The invoice must include the following information:

Paragraph 6.

the unit price excluding sales tax, specifically the amount of compensation for goods delivered or services
rendered, categorized by sales tax rate

If my interpretation of this language is correct, does this imply that every single line item on a restaurant receipt must now explicitly list its individual price before sales tax is applied?

I’m pretty sure this only applies to what we still call R-1 or R-2 invoices—you know, the ones for B2B transfers between tax entities—rather than standard retail receipts. Regular cash register receipts still fall under the standard VAT rules. That said, I caught a glimpse of some proposed changes to the VAT Act on the US Congress agenda recently, but I didn't stick around long enough to dig through all that tedious fine print.

I honestly don't get it. Why on earth does Article 79 of the Value Added Tax Act even exist? It makes zero sense to me. Why should we be forced to scribble down every single customer's full name, home address, and Social Security number just to print out a basic cash register receipt? It’s ridiculous. I mean, really, who has the time for this level of micromanagement? It feels like a total waste of energy.

Regarding this thread, it was already added to the VAT Act (Article 54a), and now it’s back in US Congress because they're adding Article 54.b (due to fiscalization). It defines who doesn't need to issue receipts.

Cash register receipts

Article 54.a

Cash register receipts, tape slips, or payment terminal confirmations must include at least the following data:
1. the number and date of issuance,
2. the name, address, and EIN of the business providing the goods or services, along with the location where the delivery occurred (store number, office, shop, etc.),
3. the quantity and standard trade name of the goods delivered, plus the type and quantity of services performed,
4. the total amount of compensation and tax, broken down by tax rate.

When exactly should you put "transfer of tax liability" on a receipt?
I always assumed it happened whenever the VAT obligation shifts to the buyer, including those exemptions under Article 41 and beyond... but apparently, I was wrong. Someone at a seminar mentioned that's not how it works.
So, what's the actual rule? 😕

Hi

The company just received an EIN from Customs—basically the US tax ID and business number... Is that actually the VAT identification number, or do we still need to file a formal request?
Thanks 😁

ruggednomad5 said:Hi

The company just received an EIN from Customs—basically the US tax ID and business number... Is that actually the VAT identification number, or do we still need to file a formal request?
Thanks 😁

Yes, that is indeed the correct number. Companies that already have an established history of international trade will typically find their VAT identification number automatically, whereas those just starting to deal with partners outside the US will need to submit a formal application.

Brenda Chase3 said:Yes, that is indeed the correct number. Companies that already have an established history of international trade will typically find their VAT identification number automatically, whereas those just starting to deal with partners outside the US will need to submit a formal application.

Thanks for the info. 🙂

Richard Howard55 said:When exactly should you put "transfer of tax liability" on a receipt?
I always assumed it happened whenever the VAT obligation shifts to the buyer, including those exemptions under Article 41 and beyond... but apparently, I was wrong. Someone at a seminar mentioned that's not how it works.
So, what's the actual rule? 😕

When you provide a service to a taxpayer who isn't based here in the States, that service isn't taxed domestically because the service is considered to take place where the recipient is located (for instance, over in Vienna), and that is when the tax liability transfer occurs via the reverse charge mechanism. To verify that a client in another country is acting as a registered taxpayer, the American service provider needs to have that client's specific VAT identification number on file. That is when you include the "tax liability transfer" or "reverse charge" clause on the invoice. This transfer simplifies the whole process by allowing the service provider to avoid having to register as a tax entity in the foreign country where the service was performed. If the provider fails to obtain a valid tax ID, the transaction is treated as being provided to a final consumer, which means the service becomes subject to taxation right here in America.
Man, there is certainly a lot to wrap your head around here. I am just thankful to Bog for this forum so we can bounce these ideas off each other and clear things up. 🙂

So, that would mean even a small business owner—someone liable for corporate income tax—who acts as an intermediary in transport services would have to issue a reverse charge invoice...
Basically, they're buying freight services by truck and then reselling that transport to someone else who actually carries out the job, say, over in Canada...

If anyone knows...

What's the full rundown when we buy goods from the European Union? Up until now, my freight forwarder handled all that import stuff, but now it looks like I'm flying solo—so I guess I have to calculate the value of the goods myself and then tack on the sales tax. I assume I just list it on the tax return as both an obligation and an input credit, so there’s no actual cash out the door for it. I'm wondering what else is on the checklist—like, do I include the shipping costs up to the border in the base value? It feels redundant since there isn't even a customs duty anymore🙄. Also, which specific forms am I supposed to fill out and file...?

I did find out that we don't have to file Intrastat reports because our turnover stayed under $566667, and apparently they notify you themselves once you actually hit the threshold. Honestly, the lady at the Intrastat helpdesk for the IRS was actually super helpful and sweet for once. 🙂

Drew Rogers6 said:If anyone knows...

What's the full rundown when we buy goods from the European Union? Up until now, my freight forwarder handled all that import stuff, but now it looks like I'm flying solo—so I guess I have to calculate the value of the goods myself and then tack on the sales tax. I assume I just list it on the tax return as both an obligation and an input credit, so there’s no actual cash out the door for it. I'm wondering what else is on the checklist—like, do I include the shipping costs up to the border in the base value? It feels redundant since there isn't even a customs duty anymore🙄. Also, which specific forms am I supposed to fill out and file...?

I did find out that we don't have to file Intrastat reports because our turnover stayed under $566667, and apparently they notify you themselves once you actually hit the threshold. Honestly, the lady at the Intrastat helpdesk for the IRS was actually super helpful and sweet for once. 🙂

You hit the nail on the head. You’re looking at the VAT return to handle both the output tax and the input credit, but you also have to file the specific report for acquisitions of goods and services from outside the US. When it comes to determining the tax base for those acquisitions, the calculation follows the exact same logic used for domestic sales under the standard tax code. In my view, that means you have to factor in everything—shipping costs, various fees, subsidies, and so on—to get that final number. That said, I’d love to hear if anyone else can weigh in and confirm that’s the right way to approach it.

Brenda Chase3 said:When you provide a service to a taxpayer who isn't based here in the States, that service isn't taxed domestically because the service is considered to take place where the recipient is located (for instance, over in Vienna), and that is when the tax liability transfer occurs via the reverse charge mechanism. To verify that a client in another country is acting as a registered taxpayer, the American service provider needs to have that client's specific VAT identification number on file. That is when you include the "tax liability transfer" or "reverse charge" clause on the invoice. This transfer simplifies the whole process by allowing the service provider to avoid having to register as a tax entity in the foreign country where the service was performed. If the provider fails to obtain a valid tax ID, the transaction is treated as being provided to a final consumer, which means the service becomes subject to taxation right here in America.
Man, there is certainly a lot to wrap your head around here. I am just thankful to Bog for this forum so we can bounce these ideas off each other and clear things up. 🙂

Keep going, please, but let's swap the service for physical goods. What would the invoice look like then? 🙂

Brenda Chase3 said:When you provide a service to a taxpayer who isn't based here in the States, that service isn't taxed domestically because the service is considered to take place where the recipient is located (for instance, over in Vienna), and that is when the tax liability transfer occurs via the reverse charge mechanism. To verify that a client in another country is acting as a registered taxpayer, the American service provider needs to have that client's specific VAT identification number on file. That is when you include the "tax liability transfer" or "reverse charge" clause on the invoice. This transfer simplifies the whole process by allowing the service provider to avoid having to register as a tax entity in the foreign country where the service was performed. If the provider fails to obtain a valid tax ID, the transaction is treated as being provided to a final consumer, which means the service becomes subject to taxation right here in America.
Man, there is certainly a lot to wrap your head around here. I am just thankful to Bog for this forum so we can bounce these ideas off each other and clear things up. 🙂

So, what happens when you're providing services to someone outside the European Union—like over in the States?... wondering how that works...
Does this follow the standard American sales tax rules, or is it handled like those transactions with the European Union?...

Patrick Peterson49 said:So, what happens when you're providing services to someone outside the European Union—like over in the States?... wondering how that works...
Does this follow the standard American sales tax rules, or is it handled like those transactions with the European Union?...

It’s essentially the same principle. The place of taxation is determined by the location of the tax resident receiving the services. The service provider needs to maintain proof that the recipient is indeed a registered tax entity in their own country. In other words, if we are dealing with a client outside the European Union, they need to provide us with documentation proving they are registered as a taxpayer locally. Up until now, there wasn't a strict requirement for the recipient to provide proof of their status, but moving forward, to properly apply the tax liability transfer to a non-European Union taxpayer, you have to obtain a certificate from the tax authority in the country where the user is registered. Now, the tricky part is what that specific certificate actually looks like and where one can even acquire it; I managed to find that this is regulated under Articles 17 and 18 of the European Union Council Implementing Regulation No. 282/2011, but I haven't been able to track down an actual sample.

The value of supplies made to a taxpayer outside the European Union should be reported solely in the VAT return under the section for "Supplies outside the European Union."

Richard Howard55 said:Keep going, please, but let's swap the service for physical goods. What would the invoice look like then? 🙂

On the invoice, we write: "Tax-exempt under Section 41(1)(a) of the Tax Code."
The responsibility for calculating the sales tax falls on the buyer (the recipient) within their own state. However, this only applies if we have exchanged our respective tax identification numbers.
For the delivery of goods, you need to fill out the specific section for out-of-state shipments on the sales tax return, along with the aggregate report for outbound goods and services.

If we don't have their tax ID on file, the shipment is taxable here, and it gets categorized under taxable sales on the tax return.

When dealing with physical goods, things get a bit more nuanced with plenty of fine print, so I can't really give a blanket rule; it’s better to look at specific case studies.

Can someone please break down how the tax base works when I'm bringing in goods from the European Union? Is it just the invoice amount, or am I supposed to tack on extra costs like shipping and freight? Also, how does the actual calculation work—which exchange rate should I be using, and is it based on the invoice date or the delivery date? Finally, what kind of paperwork do I need to prove the goods were actually shipped to another country within the EU at the time of delivery?

New updates to the Value Added Tax Act and changes to the VAT Act 👋

Brenda Chase3 said:On the invoice, we write: "Tax-exempt under Section 41(1)(a) of the Tax Code."
The responsibility for calculating the sales tax falls on the buyer (the recipient) within their own state. However, this only applies if we have exchanged our respective tax identification numbers.
For the delivery of goods, you need to fill out the specific section for out-of-state shipments on the sales tax return, along with the aggregate report for outbound goods and services.

If we don't have their tax ID on file, the shipment is taxable here, and it gets categorized under taxable sales on the tax return.

When dealing with physical goods, things get a bit more nuanced with plenty of fine print, so I can't really give a blanket rule; it’s better to look at specific case studies.

Okay, this is where I’m stuck. You're just citing the exemption code (41.1.a) without mentioning the transfer of tax liability. The buyer pays the tax back home regardless.

There’s some distinction there somewhere, but... ugh. I just can't seem to wrap my head around it properly.

I'm assuming we're talking about two registered business entities within the federal database, even though I didn't explicitly state that.🙂

Richard Howard55 said:Okay, this is where I’m stuck. You're just citing the exemption code (41.1.a) without mentioning the transfer of tax liability. The buyer pays the tax back home regardless.

There’s some distinction there somewhere, but... ugh. I just can't seem to wrap my head around it properly.

I'm assuming we're talking about two registered business entities within the federal database, even though I didn't explicitly state that.🙂

Hang on, Richard, I found it. 🙂 This Law is a nightmare—you literally have to read it from start to finish, every single article, because one thing is stated in the text while the explanation says something completely different. Good luck navigating that. For instance, under Section 79, Subsection 7, it states that if the recipient is the one liable for the VAT on goods or services, the supplier must note "transfer of tax liabilities" or "reverse charge" on the invoice. Honestly, the more I dig into this, the more confused I get.🙂

Brenda Chase3 said:Hang on, Richard, I found it. 🙂 This Law is a nightmare—you literally have to read it from start to finish, every single article, because one thing is stated in the text while the explanation says something completely different. Good luck navigating that. For instance, under Section 79, Subsection 7, it states that if the recipient is the one liable for the VAT on goods or services, the supplier must note "transfer of tax liabilities" or "reverse charge" on the invoice. Honestly, the more I dig into this, the more confused I get.🙂

Based on Article 79, Section 7, I concluded you should write "reverse charge," and it seems the same applies to 41.1.a. However, Ms. Maple (who actually knows her stuff, unlike most people still trying to figure out their jobs) mentioned at a seminar that it isn't technically "reverse charge." And honestly, 😵

... I'm trying to wrap my head around it... A three-way transaction is definitely "reverse charge" for the middleman, no question there... but then... the simplified procedure in 42 seems to be the same deal, except maybe the wording in the procedure itself is enough so you don't need to add anything extra? Ugh. ... I guess I'm asking the experts to help me find some logical footing here regarding when that specific text actually needs to be on an invoice and when it doesn't.
I'd feel terrible just guessing and putting the text where it shouldn't be, only to embarrass myself and my client on my first day working within the European Union.