Doing business with USA member states

copperstag95 said:I suppose I should ask, does the acquisition of goods or services from third-party countries also require being recorded in a separate ledger??

We're talking about imports here (acquisitions usually happen within the US). There isn't a specific official form for it, but you can always keep your own records if you want...

Jeremy Anderson63 said:We're talking about imports here (acquisitions usually happen within the US). There isn't a specific official form for it, but you can always keep your own records if you want...

Thanks. And yeah, that's definitely not what we mean by acquisition.

Back in the day, there used to be this whole oversight ledger system, but apparently, banks aren't even required to maintain those ledgers anymore. Since there's no specialized record-keeping mandate in place, I guess it means that, legally speaking, we aren't actually obligated to track this kind of merchandise at all—unless, of course, we simply decide to do so for our own peace of mind.

copperstag95 said:I suppose I should ask, does the acquisition of goods or services from third-party countries also require being recorded in a separate ledger??

Yeah, you absolutely do.
The government doesn't tell you exactly what the layout should look like—you can design it however you want—but you're legally required to keep those records per Section 163, subsection 4 of the Tax Code.

(4) To ensure all data regarding the acquisition of goods from other states, or services provided to other states or third countries is accounted for, as well as the sales tax paid during import, the taxpayer acting as the importer is required to maintain a separate record.

Honestly, I just made myself an Excel sheet. I put in columns for: entry number, posting date, invoice date, invoice number, company name, total value (split by taxable and non-taxable), and the sales tax (with columns for tax that’s deductible versus what isn't).
If I'm being totally blunt, I basically just copied the format straight out of the RRIF. 😁

ruggedmaker2 said:Yeah, you absolutely do.
The government doesn't tell you exactly what the layout should look like—you can design it however you want—but you're legally required to keep those records per Section 163, subsection 4 of the Tax Code.

(4) To ensure all data regarding the acquisition of goods from other states, or services provided to other states or third countries is accounted for, as well as the sales tax paid during import, the taxpayer acting as the importer is required to maintain a separate record.

Honestly, I just made myself an Excel sheet. I put in columns for: entry number, posting date, invoice date, invoice number, company name, total value (split by taxable and non-taxable), and the sales tax (with columns for tax that’s deductible versus what isn't).
If I'm being totally blunt, I basically just copied the format straight out of the RRIF. 😁

Don't kill yourself over this... you can just use the U-RA manual for stuff like this 😁

I have a question 😁, I'm feeling a bit lost here. I've read about every possible scenario online except this one: what happens when you acquire assets from a company that isn't part of the VAT system?
Basically, I buy something from a firm in the European Union, but that company isn't registered for VAT in its own country. How do I report the acquisition of these goods? I can't fill out the VAT forms because the company isn't in the database, which means I can't calculate input tax on the VAT return either (since I need the actual VAT invoices to do that), right? Or am I missing something? The more I read and think about it, the more confused I get. 🙂

My two cents:

I suppose if the delivery is handled by a firm that isn't registered for sales tax, then the place of supply is essentially their own home base; therefore, they wouldn't be charging any sales tax, and you, acting as the buyer, wouldn't be calculating any sales tax either, I guess.

Jeremy Anderson63 said:Don't kill yourself over this... you can just use the U-RA manual for stuff like this 😁

I haven't really figured out a software fix for that part of the headache. See, my Democratic Party filings end up getting cluttered with stuff like invoices from people who aren't even on the VAT register, or things like interest payments where there's no tax involved at all. It’s a mess.
Honestly, I don't mind manually logging three or four invoices a month in a separate file. It beats the absolute nightmare of trying to reconstruct everything from scratch when an auditor shows up at my door.😁

Fair point, though—if you're dealing with a massive pile of those kinds of receipts, my little workaround isn't exactly the smartest way to go about it.

Brian Sanders57 said:I have a question 😁, I'm feeling a bit lost here. I've read about every possible scenario online except this one: what happens when you acquire assets from a company that isn't part of the VAT system?
Basically, I buy something from a firm in the European Union, but that company isn't registered for VAT in its own country. How do I report the acquisition of these goods? I can't fill out the VAT forms because the company isn't in the database, which means I can't calculate input tax on the VAT return either (since I need the actual VAT invoices to do that), right? Or am I missing something? The more I read and think about it, the more confused I get. 🙂

If I'm following you, you're just buying goods from some "small business" over in the European Union.

In that case, you look at Section 4, subsection 2, paragraph a of the Tax Law which defines what counts as taxable. Based on that, a "small taxpayer" isn't treated as a full "taxable entity." That means there isn't even a taxable acquisition happening in the other European Union country where the shipment ends up once they complete the delivery (in this case, here in the US).

You don't fill out any special VAT forms. You just record the incoming invoice as a domestic one.

It appears, if I am understanding the current regulatory landscape correctly, that one is required to maintain specialized, distinct records for several specific scenarios:

the acquisition of goods or services originating from within the European Union
any goods or services sourced from outside the European Union
general import activities
and, perhaps most tediously, the delivery of goods to other business entities—specifically where those deliveries occur at the recipient's location—which necessitates individual tracking for every single destination entity involved.

copperstag95 said:My two cents:

I suppose if the delivery is handled by a firm that isn't registered for sales tax, then the place of supply is essentially their own home base; therefore, they wouldn't be charging any sales tax, and you, acting as the buyer, wouldn't be calculating any sales tax either, I guess.

That was my initial thought, but then I started overthinking all the "what ifs," and I just can't find any clear examples.😁

Jeremy Anderson63 said:If I'm following you, you're just buying goods from some "small business" over in the European Union.

In that case, you look at Section 4, subsection 2, paragraph a of the Tax Law which defines what counts as taxable. Based on that, a "small taxpayer" isn't treated as a full "taxable entity." That means there isn't even a taxable acquisition happening in the other European Union country where the shipment ends up once they complete the delivery (in this case, here in the US).

You don't fill out any special VAT forms. You just record the incoming invoice as a domestic one.

Exactly. We wouldn't even be able to file sales tax forms because the company isn't in the database, so they wouldn't accept the filing anyway. Thanks so much for the answers.🙂

I need to settle an invoice from a company based within the European Union that operates under the VAT system. What’s the standard procedure for handling this payment? I used to fill out Form 14 for these kinds of things, but I have a feeling that might not be the case anymore. I would really appreciate some guidance on this.

Also, could someone briefly explain how VAT works regarding transactions within the European Union (and the US)?

Thanks in advance.

Justin Jones12 said:I need to settle an invoice from a company based within the European Union that operates under the VAT system. What’s the standard procedure for handling this payment? I used to fill out Form 14 for these kinds of things, but I have a feeling that might not be the case anymore. I would really appreciate some guidance on this.

Also, could someone briefly explain how VAT works regarding transactions within the European Union (and the US)?

Thanks in advance.

Now you just fill out an international/cross-border Hub order.
It's smaller and easier.
You can find them at any bank teller window.
They haven't lowered the fees 😉

Justin Jones12 said:I need to settle an invoice from a company based within the European Union that operates under the VAT system. What’s the standard procedure for handling this payment? I used to fill out Form 14 for these kinds of things, but I have a feeling that might not be the case anymore. I would really appreciate some guidance on this.

Also, could someone briefly explain how VAT works regarding transactions within the European Union (and the US)?

Thanks in advance.

VAT isn't triggered just because a transaction happens; it’s triggered by the actual invoices being issued or when services are rendered and goods change hands. Since that opens up a massive amount of different scenarios, you're better off asking a specific question or just digging through the thread for a bit. 😉

Okay, let me try to be a bit more specific. I just received an invoice from a company based here in the USA that is part of the tax system and bills in USD. On the invoice, the sales tax is listed as zero because I provided my tax ID. I need to pay this invoice via online banking. Which type of transfer should I be selecting?

Henry Edwards33 said:VAT isn't triggered just because a transaction happens; it’s triggered by the actual invoices being issued or when services are rendered and goods change hands. Since that opens up a massive amount of different scenarios, you're better off asking a specific question or just digging through the thread for a bit. 😉

I bought some inventory from a company based in the USA (specifically, a large firm in the UK). The invoice shows $0 in sales tax. How much sales tax am I responsible for paying, and what is the process for that?

Justin Jones12 said:I bought some inventory from a company based in the USA (specifically, a large firm in the UK). The invoice shows $0 in sales tax. How much sales tax am I responsible for paying, and what is the process for that?

You don't actually "pay" the tax upfront; you just account for it. You report it on your tax filings as both an assessed liability and a credit for the goods you acquired from a US entity.
On top of your standard tax return, you'll also need to file the specific excise/sales tax reports required by the IRS.

Take a second to scroll through this thread. People have walked through this process several times already.

Justin Jones12 said:I bought some inventory from a company based in the USA (specifically, a large firm in the UK). The invoice shows $0 in sales tax. How much sales tax am I responsible for paying, and what is the process for that?

You don't actually "pay" the tax out of pocket; you just handle the accounting obligation to the IRS.

Regarding the tax itself, since you have an EIN, this is just a bookkeeping entry. No actual cash leaves your hand... just record it like you always do.

In your books, you'll record

2210 P
650 (or 660) D

24022 D (VAT payable on imports from the USA - 25%)
14022 P (VAT credit on imports from the USA - 25%)

On your tax return, you list it under:
II. 7.
III. 3.

Also, remember you need to file the supplemental tax documentation by the 20th of next month alongside your regular filing.

That’s exactly what I was looking for! Thanks so much for clearing up that bit about the Value Added Tax Act. I tried scrolling through the whole thread earlier, but honestly, I think I just ended up more confused by all the different perspectives.

Now, I suppose my only remaining question is, 🙂how does one actually go about settling an invoice correctly?

Hey everyone, I’ve been lurking here for a bit and it seems like a lot of you actually know more than the consultants who charge an arm and a leg for their advice.

I need a little help—I'm having some doubts regarding how the new Value Added Tax Act applies here, but specifically, I'm looking at this:

We had some clients from Canada send us a machine. Our job is to modify it—basically, we have to upgrade one specific part and then ship it back to them.

So, what I want to know is do we need to charge tax on this service and how should we be recording this in the books?

First things first, are you and your client actually registered in the VAT system?

Assuming you are (and listen, you better have proof your client is a registered taxpayer, regardless of where they're based overseas), then you’re looking at an exemption under Section 45, subsection 1, item 1 of the Value Added Tax Act and Section 108, subsection 8 of the regulations (look those up yourself, I'm not in the mood to copy-paste a legal textbook right now).

For exports, obviously, everything has to be documented via customs declarations, and you need solid proof that the goods actually left the US.
Since you're dealing with an upgrade, you've also got to make sure you have all the right import customs paperwork in order.

On your VAT return, you just list this under the exempt supplies section... there's a specific line for exports somewhere in there (I don't recall the exact line number off the top of my head).
As far as your financial bookkeeping goes, just keep doing what you've been doing; nothing changes there.

Honestly, if you don't have all the proper documentation—meaning the customs declarations and proof that your client is a registered taxpayer—then I have no idea how you'd even pull this off.