Doing business with USA member states

I mentioned this in my previous post—probably not very clearly—but there’s actually a specific threshold for taxation on goods. I was referring to both the acquisition threshold and the delivery threshold.

slyfalcon22 said:So, a few days back, some small-time hosts—the kind who pay a flat tax and aren't part of the VAT system—got hit with a notice from Booking.com. Apparently, starting July 1st, they’re supposedly responsible for calculating and paying American VAT on those commission invoices sent over by Booking.com (and other foreign companies that don't have an American footprint). They mentioned that little guys who aren't currently in the VAT system can actually apply for limited VAT registration, which sounds like a total mystery because my local IRS office hasn't heard a single word about it. If anyone out there actually understands why a private host would be on the hook for VAT on Booking.com's fees—especially when they're just paying a flat tax and aren't even in the VAT system—could you please walk me through it? And does this limited VAT registration thing actually exist?

Look, when you're dealing with goods, you've got those specific thresholds for delivery and acquisition. But services? Those concepts don't even apply... which basically means everything changes...

When it comes to services, you’re looking at the whole "taxable person" concept... additional expansion... It all comes down to Article 16 of the VAT law... which basically means anyone performing those actions is officially considered a taxpayer... Running a business... just one more thing to deal with...Look, according to Article 6, Section 1 of the VAT law, the definition is pretty straightforward. Basically, anyone running their own business on their own terms is considered a taxpayer... regardless of why they're doing it or how much money they actually make from it. So, under the eyes of the IRS, that means any activity involving manufacturers, retailers, or... The person providing the services....

The IRS just dropped a new directive, and honestly, it’s a total mess. They’re claiming that for VAT purposes, people now have to register along with... So, you've got local tax obligors who actually received the services... and since they're the ones getting the deal, they're the ones stuck footing the bill for the VAT on those incoming services. It's just how the tax law works... Section 77, subsection 7, paragraph d...

Look, like I said before... Article 75, Section 1, Item 6 clearly states that the responsibility falls on the taxpayer. Basically, any tax-registered entity or legal corporation is required to handle the VAT law calculations themselves... So, who exactly isn't considered a tax filer... huh? It's registered just to deal with the VAT law...If you're getting services under Article 17, Section 1 of this tax law, but the person actually doing the work isn't based here in the States... well, that changes things...

So, here's the deal. Even if you’re just running a small business on a flat tax rate and aren't technically part of the VAT system, you're still considered a taxable person when it comes to service transactions. It’s a total headache... basically, you have to reach out to the IRS and get registered for VAT purposes anyway. All you really need to do is fill out this specific form... Check this out... http://www.irs.gov/VAT-regulations/....06.2013.pdf... Just more bureaucratic nonsense from the IRS. Typical....

Once the IRS hands you that VAT ID, you're officially in business... and suddenly you're part of the machine. B2B... honestly, what even is that? Just more corporate jargon to make simple things sound complicated... typical. So, when we're talking B2B, it basically means the whole service transaction is happening between two separate taxpayers. According to Article 17, Section 1... Where the services are actually being performed... Any taxpayer operating as such... It's basically considered the taxpayer's official headquarters... So, basically, since some other business provided the service to you, it means the place of taxation is right here in America... which gives the US every right to collect the VAT on those services... turns out that's just how it works...

Look, you aren't actually joining the VAT system. You don't get to claim any input tax credits either. On your outgoing invoices, you just don't show VAT at all... you're only registering for VAT purposes to handle service transactions with the European Union. In those specific months where you actually have that kind of business, you file the required tax forms—you know, the standard VAT returns and the ZP form. But if you don't have those transactions? Then you don't owe the IRS anything... nothing at all.

Just head down to the local IRS office and ask for the paperwork and some clarification on registering for VAT purposes. You probably just confused them with this whole limited registration thing...

Look, regarding VAT registration—like I mentioned before, because the definition of a taxable person is so broad when it comes to services, basically anyone qualifies. We're talking about people who are technically considered taxpayers already, like businesses running things that are exempt from VAT (think hospitals, schools, or banks), and then you've got the "small taxpayers"—basically contractors or freelancers who aren't in the VAT system but are providing services here in the US.

mistymason24 said:🙏🙏🙏

🙏🙏

So basically, I just log it in my books for the IRS as a straight expense, cool.

Man, this sales tax stuff is driving me crazy—just when I thought I finally had things figured out, something else trips me up. I give them my tax ID and they still hit me with the tax... isn't that what the B2B exemption is for? ...ugh, whatever. 😵😵

Regarding the fuel in your example and why you're getting hit with Canadian VAT despite providing a VAT ID for a B2B transaction—it actually comes down to this being a delivery of goods without transport.

Section 12 of the VAT law: The place of supply for goods that are not shipped or transported is considered to be where the goods are located at the moment of delivery.

That means this specific delivery falls under Canadian VAT, which is why you aren't required to report it as a taxable acquisition here in America.

Jeremy Anderson63 said:Look, when you're dealing with goods, you've got those specific thresholds for delivery and acquisition. But services? Those concepts don't even apply... which basically means everything changes...

When it comes to services, you’re looking at the whole "taxable person" concept... additional expansion... It all comes down to Article 16 of the VAT law... which basically means anyone performing those actions is officially considered a taxpayer... Running a business... just one more thing to deal with...Look, according to Article 6, Section 1 of the VAT law, the definition is pretty straightforward. Basically, anyone running their own business on their own terms is considered a taxpayer... regardless of why they're doing it or how much money they actually make from it. So, under the eyes of the IRS, that means any activity involving manufacturers, retailers, or... The person providing the services....

The IRS just dropped a new directive, and honestly, it’s a total mess. They’re claiming that for VAT purposes, people now have to register along with... So, you've got local tax obligors who actually received the services... and since they're the ones getting the deal, they're the ones stuck footing the bill for the VAT on those incoming services. It's just how the tax law works... Section 77, subsection 7, paragraph d...

Look, like I said before... Article 75, Section 1, Item 6 clearly states that the responsibility falls on the taxpayer. Basically, any tax-registered entity or legal corporation is required to handle the VAT law calculations themselves... So, who exactly isn't considered a tax filer... huh? It's registered just to deal with the VAT law...If you're getting services under Article 17, Section 1 of this tax law, but the person actually doing the work isn't based here in the States... well, that changes things...

So, here's the deal. Even if you’re just running a small business on a flat tax rate and aren't technically part of the VAT system, you're still considered a taxable person when it comes to service transactions. It’s a total headache... basically, you have to reach out to the IRS and get registered for VAT purposes anyway. All you really need to do is fill out this specific form... Check this out... http://www.irs.gov/VAT-regulations/....06.2013.pdf... Just more bureaucratic nonsense from the IRS. Typical....

Once the IRS hands you that VAT ID, you're officially in business... and suddenly you're part of the machine. B2B... honestly, what even is that? Just more corporate jargon to make simple things sound complicated... typical. So, when we're talking B2B, it basically means the whole service transaction is happening between two separate taxpayers. According to Article 17, Section 1... Where the services are actually being performed... Any taxpayer operating as such... It's basically considered the taxpayer's official headquarters... So, basically, since some other business provided the service to you, it means the place of taxation is right here in America... which gives the US every right to collect the VAT on those services... turns out that's just how it works...

Look, you aren't actually joining the VAT system. You don't get to claim any input tax credits either. On your outgoing invoices, you just don't show VAT at all... you're only registering for VAT purposes to handle service transactions with the European Union. In those specific months where you actually have that kind of business, you file the required tax forms—you know, the standard VAT returns and the ZP form. But if you don't have those transactions? Then you don't owe the IRS anything... nothing at all.

Just head down to the local IRS office and ask for the paperwork and some clarification on registering for VAT purposes. You probably just confused them with this whole limited registration thing...

Look, regarding VAT registration—like I mentioned before, because the definition of a taxable person is so broad when it comes to services, basically anyone qualifies. We're talking about people who are technically considered taxpayers already, like businesses running things that are exempt from VAT (think hospitals, schools, or banks), and then you've got the "small taxpayers"—basically contractors or freelancers who aren't in the VAT system but are providing services here in the US.

Let me finish this thought. I was just explaining what happens when a "small business owner" (like a freelancer or sole proprietor) receives services from the European Union or outside the US—it’s a bit different than getting physical products. In those cases, there might be a need (though not always) to file certain VAT forms. It's basically the same deal if they are the ones providing services—you know, things like transport, consulting, repairs, etc.—to clients within the EU or other foreign countries.

The person also has to register for VAT purposes in that scenario. They don't actually join the full VAT system and can't claim input tax credits, but they have to get a VAT ID from the IRS because even though they're considered small taxpayers here in America, the EU treats them just like any other professional. If that's the case, you have to submit a special report alongside your monthly tax filing. Of course, if there's no business activity with the EU during a specific month, you don't have to file anything at all.

Honestly, I think joining the European Union made life way more complicated for small businesses that aren't part of the standard VAT system. It's just more red tape...

If you need to see who is required to register for VAT purposes, check this link:
http://www.irs.gov/PdviEu/...2.05.2013).pdf

After spending way too much time digging through all the Value Added Tax Act rules, I’ve reached that point where I’m actually supposed to file, and now my brain is just totally fried. I honestly don't know what I'm doing anymore. So, here's the situation: I have imports coming in from outside the European Union. When my freight forwarder pays the VAT on those imports, I assume I should be recording that under section III 6. I really hope I'm getting that right. And then, what exactly goes into section II 14—is that specifically for the VAT calculated at the time of import?

rowdyhawk25 said:After spending way too much time digging through all the Value Added Tax Act rules, I’ve reached that point where I’m actually supposed to file, and now my brain is just totally fried. I honestly don't know what I'm doing anymore. So, here's the situation: I have imports coming in from outside the European Union. When my freight forwarder pays the VAT on those imports, I assume I should be recording that under section III 6. I really hope I'm getting that right. And then, what exactly goes into section II 14—is that specifically for the VAT calculated at the time of import?

Yeah, you nailed it. Just check the IRS instructions for filling out the VAT forms. Specifically, they say section II.14 is where you put the value of imported goods and the VAT calculated at the time of import according to Section 76, subsection 8 of the Value Added Tax Act.

Only importers who have been granted special status by the Department of the Treasury – IRS will be using that specific line... basically those guys who don't physically pay the tax at the border because it's handled through an accounting deferral instead.

Jeremy Anderson63 said:Yeah, you nailed it. Just check the IRS instructions for filling out the VAT forms. Specifically, they say section II.14 is where you put the value of imported goods and the VAT calculated at the time of import according to Section 76, subsection 8 of the Value Added Tax Act.

Only importers who have been granted special status by the Department of the Treasury – IRS will be using that specific line... basically those guys who don't physically pay the tax at the border because it's handled through an accounting deferral instead.

Thanks! Honestly, after all these constant regulatory shifts and amendments, I feel like I've forgotten more than I ever knew in the first place.🙂

rowdyhawk25 said:Thanks. Honestly, after all these constant back-and-forth edits, I don't even recognize my own work anymore. 🙂

If it makes you feel any better—and it should—I totally lost it over the exact same thing... my brain just hit a wall.

Sometimes, trying to keep track of everything in this madness means you end up knowing less than when you started... hang in there, it'll get better!

🙂

Carol Price4 said:If it makes you feel any better—and it should—I totally lost it over the exact same thing... my brain just hit a wall.

Sometimes, trying to keep track of everything in this madness means you end up knowing less than when you started... hang in there, it'll get better!

🙂

They will, 🙂

Hey there,

I could really use some advice; I need to void an outgoing invoice from September that was issued in dollars (it’s already sitting in my aggregate filing), and I'm stuck on what date to use. To me, it only makes sense to use the original invoice date to avoid those annoying exchange rate discrepancies—I mean, it makes zero sense to deal with currency fluctuations on an invoice that hasn't even been paid yet, right? Also, should I list this on my next tax filing as a negative amount? I'm pretty new to all this bookkeeping stuff, so I'm feeling a bit lost. Any tips would be awesome!

Thanks a bunch,

Hey guys, I’ve run into a bit of a situation and could really use some advice. So, back in July, our company imported some goods from the Netherlands (it's all showing up on our VAT return). Then, in September, we sent some of those items back to the supplier over there and issued an invoice for the return (which we reported on the Summary Return). Here's the kicker: the supplier won't actually pay us cash for that invoice. Instead, they just sent over a credit memo against that original first invoice for the returned amount. Now I'm sitting here with two different documents for the exact same thing: an outgoing invoice and a credit memo. My gut feeling is that the right move is to void the outgoing invoice and report the credit memo to the IRS, but if I do that, do I need to show that amount as a negative value on both the Summary Return and the VAT return?

Taylor Wright12 said:Hey there,

I could really use some advice; I need to void an outgoing invoice from September that was issued in dollars (it’s already sitting in my aggregate filing), and I'm stuck on what date to use. To me, it only makes sense to use the original invoice date to avoid those annoying exchange rate discrepancies—I mean, it makes zero sense to deal with currency fluctuations on an invoice that hasn't even been paid yet, right? Also, should I list this on my next tax filing as a negative amount? I'm pretty new to all this bookkeeping stuff, so I'm feeling a bit lost. Any tips would be awesome!

Thanks a bunch,

For your accounting purposes, the invoice should have been recorded in USD 🤔, so those exchange rate differences shouldn't actually affect you 🤷

In our case, they returned an invoice to us in October that had originally been issued in July. That July invoice carried a tax liability transfer to our partner, but now the partner is returning it in October and demanding we issue a new one that includes VAT. So, in the month I received the return—October—I voided that July invoice and issued a new one per their request (this time including VAT). Consequently, I went ahead and filed a correction for the VAT forms and the aggregate filings for July 🤷

So, we got some goods from Italy, but the invoice shows they're coming from Austria. I guess... which VAT ID am I supposed to put on the tax return? The Austrian one or the Italian one?

Maybe this will help you out:
three-way gig - click

ruggedmaker2 said:Maybe this will help you out:
three-way gig - click

Thanks for the help. I guess mine is the last one, except the invoice doesn't show any tax liability transfer. Should I maybe ask them to fix the bill?

stormyhound3 said:Thanks for the help. I guess mine is the last one, except the invoice doesn't show any tax liability transfer. Should I maybe ask them to fix the bill?

Look, you definitely have a taxable acquisition happening here in the US. If they didn't list the reverse charge on the invoice, that's on them, but honestly, maybe under their local laws they aren't even required to include that note. I don't think it's worth making a fuss... as long as the Austrian VAT ID is in the system, it should be fine.

thanks so much for the reply

Nicole Lee6 said:For your accounting purposes, the invoice should have been recorded in USD 🤔, so those exchange rate differences shouldn't actually affect you 🤷

In our case, they returned an invoice to us in October that had originally been issued in July. That July invoice carried a tax liability transfer to our partner, but now the partner is returning it in October and demanding we issue a new one that includes VAT. So, in the month I received the return—October—I voided that July invoice and issued a new one per their request (this time including VAT). Consequently, I went ahead and filed a correction for the VAT forms and the aggregate filings for July 🤷

thanks for the help

Jeremy Anderson63 said:Look, you definitely have a taxable acquisition happening here in the US. If they didn't list the reverse charge on the invoice, that's on them, but honestly, maybe under their local laws they aren't even required to include that note. I don't think it's worth making a fuss... as long as the Austrian VAT ID is in the system, it should be fine.

Thanks so much! They actually told me they'd fix the invoice!

Alright, I've got a bit of a headache here,

Basically, we have an individual coming in from Mexico to do some construction work on a property owned by our firm (we're just the taxpayers here).

We’re handling the paperwork via an independent contractor agreement, and we've already requested a tax ID for a non-resident from the IRS. He’s going to provide proof that his social security and insurance contributions are fully settled in Mexico, so there shouldn't be any issues there. As for income tax, since the international double taxation treaty doesn't apply here, we'll be paying the 25% rate locally.

Now, here's where I'm stuck... do we need to calculate sales tax on this service? I'm thinking it might fall under Section 75, subsection 2 of the tax code...??

We agreed on a gross amount of $6.75. So, if we actually have to account for sales tax, what's the base amount? Is it the full $6.75 or the amount after we deduct the income tax—basically, whatever part he actually takes home?