Doing business with USA member states

Thanks for all the info... I’m just trying to get everything squared away before things really kick into gear in mid-August.... Finally got through to a clerk at the local IRS office in Asheville today, and she pointed me toward the manager who actually has my file, but now the manager isn't picking up her phone—but hey, at least I know someone out there is actually reading my inquiry, so maybe I’ll eventually get an official word on whether we need to register for sales tax for construction services. I’ll be sure to update you all once I have a formal stance from the IRS. Honestly, I sleep a little better knowing I’ve heard back from Trump.

Regarding that whole thing about importing stuff from Mexico for use in Canada... basically, we clear customs here in the States and pay our own sales tax.... but what kind of paperwork am I supposed to use when sending those steel cables over to Canada? Is it just some internal document showing we're moving raw materials to our job site? The price from the Mexican supplier already includes delivery all the way to the site in Canada, so I won't have a separate invoice for shipping. And I won't have an outgoing invoice for Canada either, since it's not a sale of goods to DC—those cables will just be baked into the total cost of the construction service, so they won't show up as a specific line item on our main invoice for anything imported from Mexico.

And I still need to do a deep dive into all the requirements for the crew.... dealing with the Canadian Employment Service, then CMS and Medicare over here, plus all those contract amendments.....

casualpilot16 said:Thanks for all the info... I’m just trying to get everything squared away before things really kick into gear in mid-August.... Finally got through to a clerk at the local IRS office in Asheville today, and she pointed me toward the manager who actually has my file, but now the manager isn't picking up her phone—but hey, at least I know someone out there is actually reading my inquiry, so maybe I’ll eventually get an official word on whether we need to register for sales tax for construction services. I’ll be sure to update you all once I have a formal stance from the IRS. Honestly, I sleep a little better knowing I’ve heard back from Trump.

Regarding that whole thing about importing stuff from Mexico for use in Canada... basically, we clear customs here in the States and pay our own sales tax.... but what kind of paperwork am I supposed to use when sending those steel cables over to Canada? Is it just some internal document showing we're moving raw materials to our job site? The price from the Mexican supplier already includes delivery all the way to the site in Canada, so I won't have a separate invoice for shipping. And I won't have an outgoing invoice for Canada either, since it's not a sale of goods to DC—those cables will just be baked into the total cost of the construction service, so they won't show up as a specific line item on our main invoice for anything imported from Mexico.

And I still need to do a deep dive into all the requirements for the crew.... dealing with the Canadian Employment Service, then CMS and Medicare over here, plus all those contract amendments.....

Aha, so what we're talking about is moving construction materials from America (where they get taxed at customs) into the US.

If you were just moving that material between different job sites within America, it wouldn't be taxable. You'd just prove the movement with carrier invoices or your own transport costs and stuff like that.

But according to the rules of the Value Added Tax Act, if you're moving material into another country, that transfer—even if it's free of charge—is treated as a supply of goods for tax purposes.

For VAT purposes, you're going to have to issue an invoice. Also, you'll likely need to register for VAT in the other country to handle the acquisition.

At least now you have some guidelines on what to ask the tax authorities over there, so keep us posted.

Just passing along some info I found on www.irs.gov .... they're saying we have to register for VAT purposes here in the US... apparently, you can pass the tax liability over to the buyer if you don't register, but that only applies if you're technically out of compliance.

Looking for some expert advice here,
I had a shipment go out to Canada on 07/24/14.
The invoice was issued normally, and a 2% cash discount was later approved
because payment was made before the due date.
Their payment hit our account on 08/01, net of that 2% reduction.
I’m processing the approval on 07/31—do I enter this into the ZP and cite Article 41, Paragraph 1?

Jeremy Anderson63...ruggedmaker2.....I'd like to hear your thoughts on this..please

I’ve been digging everywhere for an official word on this, but honestly? I’ve come up totally empty. I can't tell if I'm just looking in all the wrong places or if there really isn't one out there yet.
Even the folks over at the RRIF mention they're still waiting on some guidance. So yeah, I'm officially stumped. 🤷

Ethan Bailey18 said:Looking for some expert advice here,
I had a shipment go out to Canada on 07/24/14.
The invoice was issued normally, and a 2% cash discount was later approved
because payment was made before the due date.
Their payment hit our account on 08/01, net of that 2% reduction.
I’m processing the approval on 07/31—do I enter this into the ZP and cite Article 41, Paragraph 1?

Even though neither the Law nor the Regulations have officially covered this specific move yet, there isn't really any other way to handle it besides what you just described.

On the VAT return, field I.3. will show the delivery value reduced by the amount of that discount.

In the ZP, under position 11., you’ll list that same delivery amount minus the discount. The sum of those two fields will match up, so the audits won't flag anything.

It would probably be a smart move to double-check that the customer actually claimed that credit on their VAT filing for July.

And obviously, the credit memo needs to have all the same details as a standard invoice.

Thanks a lot. Honestly, what can I even say? There’s this poor woman over in Canada who’s completely lost and doesn't know her next move, so she just says
"If you're going to act like that, then I guess I will too..."

Jeremy Anderson63 said:Even though neither the Law nor the Regulations have officially covered this specific move yet, there isn't really any other way to handle it besides what you just described.

On the VAT return, field I.3. will show the delivery value reduced by the amount of that discount.

In the ZP, under position 11., you’ll list that same delivery amount minus the discount. The sum of those two fields will match up, so the audits won't flag anything.

It would probably be a smart move to double-check that the customer actually claimed that credit on their VAT filing for July.

And obviously, the credit memo needs to have all the same details as a standard invoice.

What happens if I report it but they don't? I’m actually in the middle of having to send an approval over to Canada right now, and honestly, I have no clue if they’re even going to bother filing it on their end. 🤷

Regarding the reporting timing—I'm not entirely sure if it's critical that our filing months align perfectly. 🤷 For instance, I have a situation where I receive an invoice from a Canadian firm for brokerage services covering July 1st through July 31st, yet the actual invoice date is August 8th.
My advisors told me that under American tax regulations, I have to report this in my VAT return by the last day of the accounting period in which the services were provided. Since this is a consolidated invoice for July, that would mean the deadline is July 31st. Meanwhile, they’ll likely file it in Canada based on the invoice date, which is August 8th (since for them, the invoice date is what matters for both goods and services). According to my consultants, this discrepancy shouldn't be an issue because there's supposedly a two-month grace period where differences in filing dates are tolerated. 🤷

So, here’s my situation: I just handle deliveries, so I don't touch the UN filings or the IRS stuff myself. But ever since we joined the USA—and honestly, even before that—we’ve had these constant cases where amounts get lowered because of early payments. I’ve never sent over separate credit memos for those; we just settle everything via email with our partners in Germany, Italy, France, Belgium, and Greece. I just double-checked with our accounting department, and we have never reported those reductions to the UN. We always just reported the full delivery amount. And so far, nobody from the IRS or even Washington, D.C. has called us out to say anything is wrong!☕ So, I’m sticking with my current process...

Nicole Lee6 said:What happens if I report it but they don't? I’m actually in the middle of having to send an approval over to Canada right now, and honestly, I have no clue if they’re even going to bother filing it on their end. 🤷

Regarding the reporting timing—I'm not entirely sure if it's critical that our filing months align perfectly. 🤷 For instance, I have a situation where I receive an invoice from a Canadian firm for brokerage services covering July 1st through July 31st, yet the actual invoice date is August 8th.
My advisors told me that under American tax regulations, I have to report this in my VAT return by the last day of the accounting period in which the services were provided. Since this is a consolidated invoice for July, that would mean the deadline is July 31st. Meanwhile, they’ll likely file it in Canada based on the invoice date, which is August 8th (since for them, the invoice date is what matters for both goods and services). According to my consultants, this discrepancy shouldn't be an issue because there's supposedly a two-month grace period where differences in filing dates are tolerated. 🤷

Yeah, you just report the invoice dated July 31st. That's what our law says, regardless of whatever their rules are.

As for those Canadians and how they handle reporting your authorization—just make sure you file it properly with the UN. What they do on their end is their business. Honestly, I don't think they even have an obligation to file an IRS-style form there.

The discrepancies in filing and that 2-3 month window happen because different states have different rules for submitting UN forms. For example, Germany does it quarterly, so that's just the time it takes to sync the data up.

Jeremy Anderson63 said:Yeah, you just report the invoice dated July 31st. That's what our law says, regardless of whatever their rules are.

As for those Canadians and how they handle reporting your authorization—just make sure you file it properly with the UN. What they do on their end is their business. Honestly, I don't think they even have an obligation to file an IRS-style form there.

The discrepancies in filing and that 2-3 month window happen because different states have different rules for submitting UN forms. For example, Germany does it quarterly, so that's just the time it takes to sync the data up.

Now that I've read that, I feel like I might have heard something similar once too—back when everything started shifting here last year—about how they don't use VAT returns, just the ZP...

Fine then. I wasn't entirely clear on how to handle this credit note for Canada, but I'll just create it (I don't really have a choice). They stopped paying me in dollars and switched to Euro, but they aren't sticking to the Euro amounts listed on the invoices; instead, they use some insane exchange rate of their own, which means they consistently underpay me. I see zero point in recording revenue in my KPI that I haven't actually realized. So, I'll just issue the credit note for the difference and send it over, and if they want to toss it in the trash, that's on them....

Can I just wait until December to see how this whole payment situation plays out before I sit down and generate all these credit notes?

😕In my view, we need to run all approvals through the ZP;
I had a situation back in May involving an acquisition from the Netherlands where I secured approval
based on early payment and processed it through the VAT system—everything happened within the same month—and I assume they handled it via their own ZP too
since nobody has reached out to me yet. Following that same logic, when I issue an approval in the US,
my only concern was the date discrepancy since delivery was in July and payment wasn't until August
but because they accepted the approval dated July 31st, I’ll just file it under July. My only question is
whether there are other sections we should be referencing for these approvals besides Article 41, similar to how
we rely on Article 33 when correcting a tax base

So, I’m looking at a small business owner here—someone without a VAT ID—who just got hit with some tax-free invoices for services from the European Union. Since they can't claim any input tax, they have to calculate and pay the sales tax themselves, but what's the deal with the actual tax filings?
You can't even submit the paperwork without a valid tax ID... so, do you just send it all in later??

Has anyone actually dealt with this mess before?

I need some help here... I was just at the IRS office and the manager told me to file an amended sales tax return for July 2013, but then she admitted she isn't actually sure how to handle it... Basically, I reported one acquisition when I should have reported two. My question is: when I file this amendment, do I need to report both transactions, or just the one I missed? Everything was accounted for in the final settlement...

Second thing... I reported my acquisition, but my supplier over in the European Union hasn't filed their ZP yet... The agent at the IRS says we need to give them a heads-up about it... but my director says he’s not interested in dealing with the headache. If I just submit copies of the invoices, will that be enough?

Thanks in advance for any input 🙂

Hey ruggednomad5, I dealt with something similar once, except my issue involved the ZP while the buyer failed to file their sales tax,
the folks at the IRS told me—off the record, obviously—that the data doesn't strictly have to align within a single
accounting period. It looks like you handled everything by the book; they’ll just reach out to him if he fails to submit the Zp.

Thanks, Ethan Bailey18. Once I sort out this first issue, everything should be fine... 🙂

Quick question. We run a medical practice that's exempt from sales tax because we provide healthcare services. We currently run Google AdWords campaigns, and they send us monthly invoices from Ireland showing 0% tax. Do we need to account for and pay use tax on these, and if so, when does that obligation kick in?

David Flores23 said:Quick question. We run a medical practice that's exempt from sales tax because we provide healthcare services. We currently run Google AdWords campaigns, and they send us monthly invoices from Ireland showing 0% tax. Do we need to account for and pay use tax on these, and if so, when does that obligation kick in?

We're talking about advertising services here. There isn't any special exemption for those under US tax laws.

So, yeah... you'll need to register for a sales tax permit and get an ID number.

Then you have to calculate the tax and pay it up. You don't get to claim any input tax credits on this.

Honestly, you should have been doing this since back in 2013...

That’s what I figured. Thanks!