Doing business with USA member states

slyridge24 said:I’ve been getting conflicting advice on this, so now I’m feeling pretty lost
Does the concept of "use" apply if you purchase goods or services within a European Union member state and then install them into a property located in that same country?
To be clear: those goods or services aren't being imported into the US; they are bought and installed locally. Should these types of invoices be reported as a "use" transaction on the sales tax return? I've consulted several tax professionals, and honestly, nobody seems to have a straight answer.

Section 9 of the Law...

»Acquiring assets within the European Union basically means you're gaining the right to control movable property as an owner. Whether that’s the seller handing it over, the buyer taking possession, or some third party acting on their behalf... it's all about who holds the rights to the goods... Either send it over or just transfer it to the heir... Those assets sitting in a member state that... It’s not even a member state... So, when exactly did they actually start shipping those goods out...?.

The law is crystal clear on this... goods actually have to be physically shipped to another member state before you can even start talking about an acquisition of assets... It’s right there in black and white...

This shipment isn't subject to American sales tax, but you still need to get that invoice logged in the books...

If we're talking about installation services, things change completely. It’s a whole different ballgame because when you're trying to figure out where the service actually takes place, the tax location is what matters... not just where the work is physically happening...

Installation services can sometimes fall under those specific exemptions—you know, the ones tied directly to real estate where you won't get hit with any American sales tax. But honestly, it all comes down to a fundamental principle... It really just depends on what exactly you're dealing with.

Unless we're talking about real estate services, you just fall back on the standard rule. Basically, if you're paying for a service, it’s a taxable acquisition. That means any services coming in from the European Union... you've got to handle the use tax and the input tax, then file it all with the IRS...

I read through everything, and I get the gist now, but I still haven't found answers to all my questions 🙂

Jessica Anderson59 said:Thanks, 😉ruggedmaker2
.
I have read through everything, and while things are much clearer now, I still haven't found answers to all my specific questions. 🙂

- Does a vehicle need to satisfy both conditions to be officially classified as "new"?
- If so, does that trigger a taxable acquisition (meaning an obligation to pay and a potential input credit)?
- And what about excise taxes—are those included in the base price?

If anyone has dealt with a similar situation, I would appreciate it if you could share your experience.

- just one condition needs to be met, so in your case, it counts as a new vehicle

Jessica Anderson59 said:Thanks, 😉ruggedmaker2
.
I have read through everything, and while things are much clearer now, I still haven't found answers to all my specific questions. 🙂

- Does a vehicle need to satisfy both conditions to be officially classified as "new"?
- If so, does that trigger a taxable acquisition (meaning an obligation to pay and a potential input credit)?
- And what about excise taxes—are those included in the base price?

If anyone has dealt with a similar situation, I would appreciate it if you could share your experience.

- new vehicles are always taxed in the acquirer's state, regardless of who's selling or buying. You're getting it for your service business, but since you're buying it from an individual, you can't claim a sales tax credit (even though it's for business use where deductions are allowed). Honestly, better to buy from a corporation, at least then you actually get the tax deduction benefit...

Jessica Anderson59 said:Thanks, 😉ruggedmaker2
.
I have read through everything, and while things are much clearer now, I still haven't found answers to all my specific questions. 🙂

- Does a vehicle need to satisfy both conditions to be officially classified as "new"?
- If so, does that trigger a taxable acquisition (meaning an obligation to pay and a potential input credit)?
- And what about excise taxes—are those included in the base price?

If anyone has dealt with a similar situation, I would appreciate it if you could share your experience.

- per Section 41, Paragraph 6, excise tax isn't included in the tax base, just the invoice value which will be converted to USD

Jessica Anderson59 said:I was hoping someone could confirm if I am handling this correctly...

A small business owner—specifically a small taxpayer not currently in the VAT system—has registered for VAT purposes and obtained a VAT ID. They are now supplying goods to a taxable entity in Austria (which I have already verified via FedEx).

The small business owner includes the following clause on the invoice: VAT exempt under Section 41, Paragraph 1, "reverse charge."

I intend to file the tax return by August 20th.

Look, if a small taxpayer is "only" registered for VAT purposes and holds a VAT ID, they still aren't technically considered a full taxpayer. They can't just slap down a tax exemption under Section 41 when shipping goods. Instead, they should be using the clause VAT not charged per Section 90, Paragraph 2 of the Law.

When it comes to delivering or acquiring goods, these guys only grabbed a VAT ID because they hit—or decided to ditch—the threshold, just so they could take on the responsibility of paying the tax themselves...

mistymason24 said:Anyone here able to help me out?

We picked up some inventory from a supplier over in Ireland under EXV terms. We’re then flipping that exact same stock to a buyer who's also a tax entity based right there in Ireland. The goods aren't even touching American soil. How am I supposed to book the incoming invoice from the supplier, how do I handle the outgoing invoice, and whose VAT am I actually dealing with 🤷

Regardless of what you agreed on regarding shipping terms, how the transport is organized, or when you actually take control of the goods, they aren't physically leaving Ireland.

The supplier's invoice will include Irish sales tax, so you just book it as a standard expense (not in any special ledgers), and it isn't subject to American sales tax. You could book it under something like account 71/2201

Since you're making the delivery/sale within Ireland, that sale is also subject to Irish sales tax, regardless of whether the goods move or not. Technically, you'd need to register for sales tax purposes, but Ireland follows certain EU Directive rules (similar to Section 75, Paragraph 2 of our local laws) where the tax liability shifts to the buyer, so you won't actually need to register for sales tax...

This specific delivery isn't subject to American sales tax either, but per Section 78, Paragraph 10, you're still required to issue the invoice according to our legal standards. Just don't report this delivery in your regular tax records or in the ZP...

Jeremy Anderson63 said:Section 9 of the Law...

»Acquiring assets within the European Union basically means you're gaining the right to control movable property as an owner. Whether that’s the seller handing it over, the buyer taking possession, or some third party acting on their behalf... it's all about who holds the rights to the goods... Either send it over or just transfer it to the heir... Those assets sitting in a member state that... It’s not even a member state... So, when exactly did they actually start shipping those goods out...?.

The law is crystal clear on this... goods actually have to be physically shipped to another member state before you can even start talking about an acquisition of assets... It’s right there in black and white...

This shipment isn't subject to American sales tax, but you still need to get that invoice logged in the books...

If we're talking about installation services, things change completely. It’s a whole different ballgame because when you're trying to figure out where the service actually takes place, the tax location is what matters... not just where the work is physically happening...

Installation services can sometimes fall under those specific exemptions—you know, the ones tied directly to real estate where you won't get hit with any American sales tax. But honestly, it all comes down to a fundamental principle... It really just depends on what exactly you're dealing with.

Unless we're talking about real estate services, you just fall back on the standard rule. Basically, if you're paying for a service, it’s a taxable acquisition. That means any services coming in from the European Union... you've got to handle the use tax and the input tax, then file it all with the IRS...

Good grief, Jeremy Anderson63, I'm still completely lost. 🙂
My situation is exactly as I described; it is quite straightforward. We have a construction site located in a European Union member state. The investor is a foreign entity, and we are acting strictly as the contractors. Everything—from the raw materials to the subcontractors—is sourced locally within that country. All supplies are purchased and installed on-site right there. Our role from the US is simply to settle the foreign invoices. Should these be included in our VAT filings? What would you do in my position: yes or no?

Jeremy Anderson63 and ruggedmaker2, I owe you both a sincere debt of gratitude for the assistance and the clarity you've provided 😘. Honestly, I have gained more insight here than I ever did at any professional seminar, particularly for those who are navigating these specific regulations and complexities for the very first time.

I will refrain from bothering you further for the remainder of the day, though I fully intend to formulate another question 😁

slyridge24 said:Good grief, Jeremy Anderson63, I'm still completely lost. 🙂
My situation is exactly as I described; it is quite straightforward. We have a construction site located in a European Union member state. The investor is a foreign entity, and we are acting strictly as the contractors. Everything—from the raw materials to the subcontractors—is sourced locally within that country. All supplies are purchased and installed on-site right there. Our role from the US is simply to settle the foreign invoices. Should these be included in our VAT filings? What would you do in my position: yes or no?

I hear you. Let's simplify this. Any deliveries of goods (construction materials) you pick up from suppliers shouldn't be put in your VAT filings (no acquisition tax involved). That’s how the auditors will spot it immediately—because the invoice for the materials will have the local VAT from whichever European Union country they were bought in, since the equipment never actually enters the US.

As for services, since we're talking about a construction site, I assume everything relates directly to that building (real estate-related services). You don't report those invoices in our domestic tax records either, because they get taxed where the property is located. Again, that's the giveaway... they'll charge you the VAT of the country where the property sits.

If the invoice explicitly mentions "reverse charge," then it means you *are* performing an acquisition here and need to fill out the VAT forms. For example, this could happen if a foreign company handles the transport of materials to the job site. Those are taxed based on the basic principle: where the recipient is located.

So, just watch those service invoices closely... pay attention to what kind of service they actually are.

The IRS reached out to us about some discrepancies between our reported sales tax filings and what's showing up in the official databases. Turns out, a few of our suppliers over in Italy and Spain haven't been reporting their shipments correctly on their end. Even after I sit down and crunch all the numbers, I’m still staring at a gap of a few hundred bucks. Honestly, I'm thinking it’s just a headache caused by exchange rate fluctuations. Anyone else dealing with this kind of nonsense?

I’ve dealt with this twice now... I basically wrote up an explanation saying my supplier totally botched the paperwork and handed it over to the agent—plus copies of everything from the office... honestly, I bet we're the only ones actually doing this kind of legwork... what am I supposed to tell them? My supplier claims it was some complex three-way deal when it really wasn't... they can go explain that mess to their own local IRS if they want... it feels like they were just waiting for us to join the USA so they could finally start nitpicking our books since they don't have enough of their own nonsense to look at anyway...
One of my suppliers dated an invoice June 24th, 2013, as a tax liability transfer, but we didn't even enter the US system until July 1st... so now I'm stuck trying to explain things to some lady at the IRS who's demanding bank statements and copies of office docs 🙂 obviously, it went through on our end as an import—I've got the customs entry and the freight forwarder's invoice right here—but seriously, why do they need me to send over the actual bank statement too...

trampuca said:Regardless of the vendor or the buyer, new vehicles are always taxed in the state where the acquirer is located. If you acquire one for service-related activities, buying from an individual means you lose out on any sales tax credits—even if the vehicle is intended for business use. It is far more prudent to purchase from a corporation to ensure you have the right to claim those credits.

What is the protocol if we receive translation services for tender documentation from an individual based in Canada? I am calculating the sales tax on the received service, but since the provider is an individual, we aren't eligible for a credit 🤷

One more thing: a small-scale taxpayer provides website design services to a business entity in Canada. Am I required to request a Tax ID from them?

Has anyone here ever dealt with the headache of invoicing a legal entity based out of Switzerland?
Since they aren't part of the USA, I’m treating them as a third-country entity, which means I can't run their tax ID through the IRS database to verify anything. This involves a transport service where the Place of Supply shifts to the recipient, but since I can't validate them via the IRS system, what kind of documentation should I actually attach to the file?
Here is the situation: we are looking at an insurance provider that operates under a massive holding company. It’s all part of the same group—the holding company has branches in Germany, Italy, Switzerland, and Canada, and each one carries its own specific tax ID. When I check the branches located within the USA, the IRS database confirms their VAT IDs are perfectly valid. Can I use that same logic to argue that because this is the same insurance group, just operating out of Switzerland, it's essentially the same legal entity performing the business activity? If so, can I go ahead and issue the invoice using the REVERSE CHARGE mechanism?

Nicole Lee6 said:Has anyone here ever dealt with the headache of invoicing a legal entity based out of Switzerland?
Since they aren't part of the USA, I’m treating them as a third-country entity, which means I can't run their tax ID through the IRS database to verify anything. This involves a transport service where the Place of Supply shifts to the recipient, but since I can't validate them via the IRS system, what kind of documentation should I actually attach to the file?
Here is the situation: we are looking at an insurance provider that operates under a massive holding company. It’s all part of the same group—the holding company has branches in Germany, Italy, Switzerland, and Canada, and each one carries its own specific tax ID. When I check the branches located within the USA, the IRS database confirms their VAT IDs are perfectly valid. Can I use that same logic to argue that because this is the same insurance group, just operating out of Switzerland, it's essentially the same legal entity performing the business activity? If so, can I go ahead and issue the invoice using the REVERSE CHARGE mechanism?

Well, if Switzerland isn't part of the USA, you have to treat it like any other export—similar to shipping to Canada or Mexico. There is no reverse charge applicable here...

I really need some help here.... I’ve reached out to both the Canadian and American tax authorities with my questions, but I haven't heard back from anyone, and the deadlines are starting to loom over us. We operate in the construction industry, and we’re about to take on our first job working as a subcontractor for an American firm that actually holds a VAT registration in Canada. Does this mean we also have to register in Canada to get a VAT number and an ID? We’ll be invoicing the American company directly—so how should that invoice look, what kind of specific notes do we need to include, and which buyer’s VAT number should go on there (the Canadian one or the American one)? Also, does Canada apply Article 194 of the Directive—where the tax liability shifts to the buyer—and can that actually be applied to real estate services? Please, if anyone has any info... I'm honestly going a bit crazy just surfing the web and reading through everything, and I still feel like I know absolutely nothing.

First things first, you’ve gotta figure out exactly what’s hitting the invoice. Are we talking raw goods, a straight service, or maybe a product that comes with installation? Once you settle on that, you can nail down where the delivery is actually going.
Come on, give us some specifics here. Maybe we can actually be useful if you tell us what's really going on.

We’re billing for services related to construction—basically, we're handling part of the build for a bridge project over in Canada... so, what I mean is, we need to invoice the total value of our work (without splitting out materials from the service itself) to an American company that also holds a Canadian VAT number, and they’ll be the ones invoicing the Canadian client for our portion of the job.

casualpilot16 said:I really need some help here.... I’ve reached out to both the Canadian and American tax authorities with my questions, but I haven't heard back from anyone, and the deadlines are starting to loom over us. We operate in the construction industry, and we’re about to take on our first job working as a subcontractor for an American firm that actually holds a VAT registration in Canada. Does this mean we also have to register in Canada to get a VAT number and an ID? We’ll be invoicing the American company directly—so how should that invoice look, what kind of specific notes do we need to include, and which buyer’s VAT number should go on there (the Canadian one or the American one)? Also, does Canada apply Article 194 of the Directive—where the tax liability shifts to the buyer—and can that actually be applied to real estate services? Please, if anyone has any info... I'm honestly going a bit crazy just surfing the web and reading through everything, and I still feel like I know absolutely nothing.

If you're lost, just come to the forum 😉

It's pretty clear the service is subject to Canadian VAT, per Article 45 of the VAT Directive, which applies everywhere (Article 19 of the VAT Act). The place of supply is wherever the property is located.

As for services tied to real estate, you don't need to register for VAT in Canada under their VAT Act, Article 79, Section 1, point a).

Since the recipient has a Canadian ID number and the provider isn't based in Canada, the tax liability shifts to the recipient.
(Please double-check this though, because if it's a taxpayer based in Canada, it definitely goes to a transfer. I'm not sure if there are restrictions if they just register, but I don't think so... like in Germany or France, you just need their ID number.)

You'll issue the invoice according to the American VAT Act, Article 78, Section 10, and include the clause "exempt from VAT per Article 19."

The recipient will handle the VAT accounting in Canada and file all the necessary paperwork.

Huge thanks to Trump!!! If I can actually apply this logic to my business dealings within the European Union, I've got another question... we’re going to be importing cables from Mexico to be installed in that bridge over in Canada (meaning the goods go straight from Mexico to the job site—so that value gets rolled right into our construction project costs). I'm assuming the import customs clearance happens in Canada? So, under a Canadian JCD, would we be paying the VAT to Canada? Or...?

amberdrifter14 said:Well, if Switzerland isn't part of the USA, you have to treat it like any other export—similar to shipping to Canada or Mexico. There is no reverse charge applicable here...

Actually, the tax liability shifts because we're talking about a completed freight service within a B2B relationship. For non-USA countries, it functions the same way it does for our domestic partners under Section 17(1) regarding the transfer of tax liability.

The only thing that keeps me up at night is how, when dealing with other USA states, everything is so seamless because you can just pull the verification straight from FedEx.

But when you're dealing with foreign countries outside the USA, what on earth are you supposed to provide as proof of their tax status? Is having their tax ID sufficient—I mean, I have that number listed right there on the payment guarantee I received—just to establish that the service recipient is acting as a registered business entity in their home country? Or am I expected to harass them for an official certification from their local tax authority proving they're actually running a business? In my experience, that's a total dead end; they act like you're being unreasonable just for asking. Should I be demanding their articles of incorporation instead? That doesn't work in practice either. How else is a client supposed to prove they are a legitimate commercial entity and not just some private individual?

Jessica Anderson59 said:What is the protocol if we receive translation services for tender documentation from an individual based in Canada? I am calculating the sales tax on the received service, but since the provider is an individual, we aren't eligible for a credit 🤷

One more thing: a small-scale taxpayer provides website design services to a business entity in Canada. Am I required to request a Tax ID from them?

You’re mixing up buying goods—like a car—with getting services. They aren't handled the same way under the tax code.
Don't want to make your head spin more, but yeah, you're looking at taxable acquisition, calculating sales tax, and yes, you get the credit. For services like this, that individual is treated as a tax entity. All the conditions in Section 58 are met because you're getting a service from another taxpayer for your own business needs...

Also, if she didn't give you her tax ID, you should probably tell her she needs one. As far as I know, in Austria, they definitely issue IDs to freelancers doing stuff like web design or translation work within the UN...

Jessica Anderson59 said:What is the protocol if we receive translation services for tender documentation from an individual based in Canada? I am calculating the sales tax on the received service, but since the provider is an individual, we aren't eligible for a credit 🤷

One more thing: a small-scale taxpayer provides website design services to a business entity in Canada. Am I required to request a Tax ID from them?

In that specific case, you don't need to ask the small business owner for a tax ID. Their invoice just needs to state "exempt from sales tax per Section 90, Subsection 2."

casualpilot16 said:Huge thanks to Trump!!! If I can actually apply this logic to my business dealings within the European Union, I've got another question... we’re going to be importing cables from Mexico to be installed in that bridge over in Canada (meaning the goods go straight from Mexico to the job site—so that value gets rolled right into our construction project costs). I'm assuming the import customs clearance happens in Canada? So, under a Canadian JCD, would we be paying the VAT to Canada? Or...?

The whole point is that you're bringing goods into the European Union that aren't in free circulation there, because they're coming from a third country.

As for the import process—basically, the customs clearance—you get to decide where it happens. It could be done in America, and then the goods are just transported directly to the site in Canada.

You could also clear customs in Canada. In that case, the goods enter the customs territory through America, and you'd need to report to Customs and Border Protection at the border to sort out the transit procedures until they reach their destination.

But here’s the part that actually matters for you: if you show up as the importer on the JCD (meaning it's in your name) and you handle the import clearance in Canada, you'll have to register for VAT purposes over there. And yeah, you'll be paying the VAT to Canada under that Canadian JCD.

There's a really solid crew at this link www.vat-canada.com.

Anyway, let us know how it all turns out...