Doing business with USA member states

In our current setup, we’ve configured the software so that any acquisition of goods or services from the European Union or other foreign countries—along with the corresponding transfer of tax liabilities—gets funneled directly into our regular UR. The VAT essentially calculates itself automatically; we just added some extra columns to track those specific tax obligations within the ledger and linked everything straight to the VAT return form.

Beyond that, we actually went ahead and built a dedicated registry specifically for these acquisitions. We haven't done anything similar for domestic tax liabilities, so I suppose I'm wondering whether maintaining these separate records is a legal requirement, or if it's more of a "nice-to-have" feature for our own peace of mind, given that the regular UR handles all of this quite smoothly anyway.

Regarding the import of goods, we haven't actually had any imports since joining the European Union, but the process still flows through the standard UR. Once the new assessment methods are fully implemented, our software should support this via the regular UR as well, but I guess the question remains: even if the system supports it, are we actually permitted—or perhaps expected—to maintain a separate registry, like a specialized Import Ledger, for goods coming in from third countries?

David Green642 said:That's what they're asking for 😉 THANKS! Just one more quick follow-up to be safe: since the amount is in dollars, I just convert it using the mid-market exchange rate to USD, right? 👋

No problem! 😉

Yeah—just use the HNBA mid-market rate from the day the invoice was issued.

Carol Price4 said:No problem! 😉

Yeah—just use the HNBA mid-market rate from the day the invoice was issued.

I doubt it’s some special acquisition under a margin taxation scheme or anything like that. 😁

Henry Edwards33 said:I doubt it’s some special acquisition under a margin taxation scheme or anything like that. 😁

haha, they didn't specify... but you never really know, 😂

I really need some help here! 🙂 Ever since all these new regulations kicked in, I've been focusing exclusively on service-based work, and now I've suddenly found myself in a spot where I have no clue what the actual procedure is or what specific pitfalls to watch out for 😬

So, here’s the situation: A sole proprietor is buying a used truck (an off-road vehicle) from a seller in a neighboring state—I think the seller is also a small business owner, maybe an LLC or something similar 🤔. We've agreed on a price of 7,000 USD.

What exactly do I need to be careful about? What specific details are required on the invoice? Are there certain legal notations that absolutely have to be included? If I provide my tax ID, will they issue the invoice without sales tax, or how does that process work? Also, how should this be recorded in the accounting software?

Back when we bought a truck from Germany in 2011, there were no customs issues because it was an EU-manufactured commercial vehicle coming from within the EU, so I assume it’ll be just as smooth this time around... 🤷 There won't be any transport costs either, since the owner is just going to drive the truck back to the US himself...

Do I actually need to apply for an EORI number before the purchase is finalized?

And one more thing: do I still need to log this truck purchase in the supervisory ledger, or is that outdated requirement?

A small business owner is providing services—event planning, specifically—for a client based in the European Union.
So, the service actually happens right here in the States, but the invoice goes abroad...

Does he need a VAT ID?

I’m thinking no—since everything is happening locally, he just needs to add a note:

Not subject to taxation according to Regulations art.90 item 2 of the VAT Act.

There shouldn't be any need to file a VAT return or any special reports, right?

It's a different story when you're exporting services, like web design or whatever, but in this case, the clients are coming here to the US to actually use the service..

Carol Price4 said:A small business owner is providing services—event planning, specifically—for a client based in the European Union.
So, the service actually happens right here in the States, but the invoice goes abroad...

Does he need a VAT ID?

I’m thinking no—since everything is happening locally, he just needs to add a note:

Not subject to taxation according to Regulations art.90 item 2 of the VAT Act.

There shouldn't be any need to file a VAT return or any special reports, right?

It's a different story when you're exporting services, like web design or whatever, but in this case, the clients are coming here to the US to actually use the service..

Nope, the European Union doesn't recognize your "small business" status under Section 77, subsection 4. Any taxpayer with a headquarters, permanent establishment, residence, or habitual abode in the US who provides services in another European Union member state—where the recipient is also in a member state and obligated to pay VAT under Article 196 of Council 2006/112/EU--must register for VAT purposes. - basically the B2B principle.

So yeah, you have to register for VAT (if you aren't already in the system). It doesn't make you a taxable entity for domestic goods or services, just for acquisitions and supplies within the European Union (you won't get any input tax credits).

If you're already in the VAT system, then you need to request a VAT ID, basically by filling out this form: http://www.irs.gov/PdviEu/...6.2013.%29.pdf

Plus, you still have to submit your VAT returns and summary reports.

Carol Price4 said:A small business owner is providing services—event planning, specifically—for a client based in the European Union.
So, the service actually happens right here in the States, but the invoice goes abroad...

Does he need a VAT ID?

I’m thinking no—since everything is happening locally, he just needs to add a note:

Not subject to taxation according to Regulations art.90 item 2 of the VAT Act.

There shouldn't be any need to file a VAT return or any special reports, right?

It's a different story when you're exporting services, like web design or whatever, but in this case, the clients are coming here to the US to actually use the service..

What matters here is who you're providing the service to—individuals or legal entities. Here's what the IRS says:

The question is: Our small taxpayer (a simplified filer without a VAT ID), whose business involves computer programming, web portals, and other IT-related services, designs websites and performs other electronic services for taxpayers in the European Union.

The small taxpayer needs to request a VAT ID from the competent IRS, and on the invoice for services rendered to taxpayers from other member states, they won't charge VAT, but will instead include a note stating that the tax liability is transferred based on Article 17, subsection 1 of the VAT Act.

The small taxpayer reports the completed services in the summary report and the VAT return for the accounting period in which the services were performed.

If an American small taxpayer provides services to citizens in other member states, they won't charge American VAT, nor are they required to register in those other member states for those services.

Regarding this answer from July 24, 2013, we'll clarify further: Small taxpayers, in cases where they provide services to citizens in another member state, should contact the IRS of that member state to find out if they need to register in any specific member state or if there are certain tax obligations for them.

Jeremy Anderson63 said:Nope, the European Union doesn't recognize your "small business" status under Section 77, subsection 4. Any taxpayer with a headquarters, permanent establishment, residence, or habitual abode in the US who provides services in another European Union member state—where the recipient is also in a member state and obligated to pay VAT under Article 196 of Council 2006/112/EU--must register for VAT purposes. - basically the B2B principle.

So yeah, you have to register for VAT (if you aren't already in the system). It doesn't make you a taxable entity for domestic goods or services, just for acquisitions and supplies within the European Union (you won't get any input tax credits).

If you're already in the VAT system, then you need to request a VAT ID, basically by filling out this form: http://www.irs.gov/PdviEu/...6.2013.%29.pdf

Plus, you still have to submit your VAT returns and summary reports.

What matters here is who you're providing the service to—individuals or legal entities. Here's what the IRS says:

The question is: Our small taxpayer (a simplified filer without a VAT ID), whose business involves computer programming, web portals, and other IT-related services, designs websites and performs other electronic services for taxpayers in the European Union.

The small taxpayer needs to request a VAT ID from the competent IRS, and on the invoice for services rendered to taxpayers from other member states, they won't charge VAT, but will instead include a note stating that the tax liability is transferred based on Article 17, subsection 1 of the VAT Act.

The small taxpayer reports the completed services in the summary report and the VAT return for the accounting period in which the services were performed.

If an American small taxpayer provides services to citizens in other member states, they won't charge American VAT, nor are they required to register in those other member states for those services.

Regarding this answer from July 24, 2013, we'll clarify further: Small taxpayers, in cases where they provide services to citizens in another member state, should contact the IRS of that member state to find out if they need to register in any specific member state or if there are certain tax obligations for them.

Jeremy Anderson63, you're spot on—everything you said is crystal clear. But here's the thing—the service isn't actually happening within the European Union. We have foreigners coming right here to the States, eating, drinking, and hosting their big events, then heading home—all while the invoice gets sent straight to a company over in the EU.

So, the IRS agent is actually telling me I don't even need a VAT number—just a quick note citing Article 90, Section 2 instead of Section 1. Honestly, pretty straightforward!

So, I told my client they should just go ahead and get an EIN—honestly, there's zero downside—and I’ll probably head over to the main office to check in with our tax advisor just to be safe and grab an official opinion...

Carol Price4 said:Jeremy Anderson63, you're spot on—everything you said is crystal clear. But here's the thing—the service isn't actually happening within the European Union. We have foreigners coming right here to the States, eating, drinking, and hosting their big events, then heading home—all while the invoice gets sent straight to a company over in the EU.

So, the IRS agent is actually telling me I don't even need a VAT number—just a quick note citing Article 90, Section 2 instead of Section 1. Honestly, pretty straightforward!

So, I told my client they should just go ahead and get an EIN—honestly, there's zero downside—and I’ll probably head over to the main office to check in with our tax advisor just to be safe and grab an official opinion...

Honestly, I wouldn't bet my life on what a random clerk says, especially if they haven't even bothered to study the new law...

The bottom line is this: the fundamental rule for taxing services under the VAT Act is the "place of taxation." But that "place" isn't where the actual work happens... it's the taxable location defined by sections 16 through 26 of the Law.

Here's a piece by a tax consultant who's definitely more qualified than any desk clerk. You'll see that the European Union doesn't really care about "small" businesses...

Nicole Lee6 said:I really need some help here! 🙂 Ever since all these new regulations kicked in, I've been focusing exclusively on service-based work, and now I've suddenly found myself in a spot where I have no clue what the actual procedure is or what specific pitfalls to watch out for 😬

So, here’s the situation: A sole proprietor is buying a used truck (an off-road vehicle) from a seller in a neighboring state—I think the seller is also a small business owner, maybe an LLC or something similar 🤔. We've agreed on a price of 7,000 USD.

What exactly do I need to be careful about? What specific details are required on the invoice? Are there certain legal notations that absolutely have to be included? If I provide my tax ID, will they issue the invoice without sales tax, or how does that process work? Also, how should this be recorded in the accounting software?

Back when we bought a truck from Germany in 2011, there were no customs issues because it was an EU-manufactured commercial vehicle coming from within the EU, so I assume it’ll be just as smooth this time around... 🤷 There won't be any transport costs either, since the owner is just going to drive the truck back to the US himself...

Do I actually need to apply for an EORI number before the purchase is finalized?

And one more thing: do I still need to log this truck purchase in the supervisory ledger, or is that outdated requirement?

An EORI number is for countries outside the European Union. Within the EU, the VAT Nr is what matters; just check if you are listed in VIES.
You don't need the supervisory ledger for this.

Jeremy Anderson63 said:Honestly, I wouldn't bet my life on what a random clerk says, especially if they haven't even bothered to study the new law...

The bottom line is this: the fundamental rule for taxing services under the VAT Act is the "place of taxation." But that "place" isn't where the actual work happens... it's the taxable location defined by sections 16 through 26 of the Law.

Here's a piece by a tax consultant who's definitely more qualified than any desk clerk. You'll see that the European Union doesn't really care about "small" businesses...

Thx Jeremy Anderson63—I thought the same thing at first, but then that clerk totally threw me off by saying it wasn't necessary. Though, I don't trust them much either... what this article is saying makes total sense.

casualorca5 said:An EORI number is for countries outside the European Union. Within the EU, the VAT Nr is what matters; just check if you are listed in VIES.
You don't need the supervisory ledger for this.

We have a VAT ID because we provide services within the European Union, so we went through the trouble of getting one issued.

We picked up a truck, and our contact in Canada issued an invoice that lists both our details and theirs, along with the vehicle specs, but it just shows a "net price." He didn't include any note explaining why he didn't charge sales tax. Should I give him a call and demand he cite some specific article from their local tax law? 🤔

We checked in with Customs, and they told us we don't owe any special excise taxes as far as they're concerned. They said once we finish the homologation process, we should bring the invoice back so they can slap one of their official stamps on it.

I was browsing the IRS website and found a table regarding the acquisition of used vehicles, and looking at the column for registration documents, it says:
- a note printed on the invoice or other document used to acquire the vehicle, or a special document certified by an IRS stamp stating: "The acquirer is required to report the acquisition on Form VAT-S and calculate the sales tax on Form VAT."

Does this apply strictly to passenger cars, or does it cover commercial trucks too? Is it really not enough for me to just file my own VAT and VAT-S paperwork? Am I actually expected to take that physical invoice down to the IRS office just to get one of those official stamps? 🤷

I could really use some guidance here...
I just received an invoice from a vendor in the European Union regarding shipping costs (moving items from production to the distribution company). Usually, they bundle these costs directly onto the product invoice, so I just include them in the landed cost of the goods. Should I be recording this in the import ledger as an acquisition of goods from the EU, or as a received service from the EU?
The actual goods were acquired back in November, but this specific invoice arrived in December.
Thanks in advance for any help!

So, why didn't they just bundle everything into one invoice this time—both the goods and the shipping costs?
Are we looking at a different kind of deal now, or what?

By the way, just a heads-up: Sections 7 and 8 of the tax code lay out exactly what counts as a product versus a service. You probably already have that memorized, but hey, I figured I'd mention it just in case.

Not sure if this is the right spot, but since we’re talking sales tax... let's just roll with it. 🙂

We sell magazines, and it’s the same old story I see everywhere in business... we send over a proposal, the customer signs up for a yearly subscription, then we hit them with the invoice and ship the magazines out monthly all through next year.

Here’s my headache: because the sales tax rate is changing, and we haven't issued a formal prepayment invoice yet—just a standard bill showing a 10% tax rate—how messed up is that? Especially since most of the actual deliveries happen next year when the magazine tax rate jumps to 13%.

In a perfect world, wouldn't it be smarter to issue a prepayment invoice and then just offset that 10% every month when we bill for the actual delivery at the 13% rate? But what trips me up is that those big professional publishing houses I deal with just slap down a single invoice with 10% tax and call it a day... 😕

(I know you don't really "reverse" prepayment invoices anymore; you just settle it on the delivery invoice, but that was just easier to explain)

Hello everyone. Since there is already a dedicated thread regarding imports from China, I was wondering if we have one covering imports from within the USA. I haven't come across a specific discussion on this yet, so if such a topic exists, please feel free to link me 🙂
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It is quite clear that individuals can order products from within the USA without facing any additional tax or duty burdens. However, my question pertains to how the process works for established companies and small businesses ordering goods domestically.

I assume the underlying logic remains the same. Up until now, I have only ever placed orders as a private individual, but an opportunity has arisen for me to purchase certain items for my business from domestic suppliers. Given that we don't need to deal with customs brokers for intra-country shipments, I am curious about what the necessary requirements are.

Furthermore, what is the standard procedure for packages arriving from other parts of the country? Are they subject to inspection, or are they simply delivered directly to the business address? Is the invoice the only critical document to maintain in this entire process?

I would greatly appreciate some firsthand information from anyone who regularly handles business-to-business imports or domestic procurement for their company.

Thank you very much.🙂

restlesstiger102 said:Hello everyone. Since there is already a dedicated thread regarding imports from China, I was wondering if we have one covering imports from within the USA. I haven't come across a specific discussion on this yet, so if such a topic exists, please feel free to link me 🙂
.
It is quite clear that individuals can order products from within the USA without facing any additional tax or duty burdens. However, my question pertains to how the process works for established companies and small businesses ordering goods domestically.

I assume the underlying logic remains the same. Up until now, I have only ever placed orders as a private individual, but an opportunity has arisen for me to purchase certain items for my business from domestic suppliers. Given that we don't need to deal with customs brokers for intra-country shipments, I am curious about what the necessary requirements are.

Furthermore, what is the standard procedure for packages arriving from other parts of the country? Are they subject to inspection, or are they simply delivered directly to the business address? Is the invoice the only critical document to maintain in this entire process?

I would greatly appreciate some firsthand information from anyone who regularly handles business-to-business imports or domestic procurement for their company.

Thank you very much.🙂

They just ship "straight" to your business address—no customs duties or brokers needed.

The main thing is making sure you pay via bank transfer (for the Federal Reserve) and ensuring your company's name and tax ID are clearly listed on the invoice (though obviously, you need to be registered for your tax ID before you start importing).

So, here is how I see it. I would either settle the payment through PayPal, which I have linked directly to my business checking account, or I could simply wire the funds from my personal account straight to theirs.

Which specific number are you referring to? Are you looking for my EIN?

By the way, does it make any difference that I am currently operating outside of the standard sales tax system?

restlesstiger102 said:So, here is how I see it. I would either settle the payment through PayPal, which I have linked directly to my business checking account, or I could simply wire the funds from my personal account straight to theirs.

Which specific number are you referring to? Are you looking for my EIN?

By the way, does it make any difference that I am currently operating outside of the standard sales tax system?

You'll need an EIN for customs stuff.

That import tax ID (which is basically the same thing as your EIN but listed in the tax registry) is what you need if you want to bring goods in without paying sales tax upfront.

If you aren't registered for sales tax, you can still import goods from within the USA by paying the sales tax the supplier charges (up to a certain threshold), or you can register for sales tax and get an import ID specifically for that. Then, you'd just handle the sales tax on those specific import invoices yourself.