Doing business with USA member states

Patrick Peterson49 said:Hey, looking for some expert eyes on two different scenarios...

Scenario one:
Company A is based here in the US, Company B is in Germany, and Company C is over in Mexico. Company A buys goods from Company B, then sells those same goods to Company C. To make it work, Company B ships directly from their factory using DAP Mexico terms straight to Company C. We're talking export declarations for when it leaves the European Union—Company B handles the actual export, but they swap out their invoice for an invoice from Company A. Apparently, that’s how it works at customs—we checked with both freight forwarders and customs agents—so Company B's invoice is just shown for review during clearance. The end buyer shouldn't even see Company B's invoice. On Company B's invoice, Company A is listed as the buyer, but it specifies the goods are being delivered to Company C. So, where does Company A report this? The VAT return? The VAT-S form? Intrastat?

Scenario two:
Company A buys goods from Company B in Germany under FCA Canada terms, and then sells them to Company C in Mexico. This involves export declarations when leaving the European Union, but this time, Company A is the one handling the export. Where does Company A need to report this? VAT return? VAT-S form? Intrastat? Or maybe a VAT registration in Canada?

😕
Carol Price, Jeremy Anderson63, Richard Howard55, Darsey 🙂

I’ll give this a shot, though I suppose my colleagues can correct me if I'm off base.

Scenario one:
A --> VAT on acquisition from B (VAT-S), skipping Intrastat since the goods never actually physically entered A.
A --> export delivery to C.

Scenario two:
A --> VAT on acquisition from B (VAT-S), again, no Intrastat.
A --> export delivery to C.

Now we just wait and see! 🙂

Since nobody seems interested in a deep dive, here’s what I’ve figured out...

Case one.
Company A isn't showing any EU acquisitions on their US VAT returns or regular tax filings—mostly because the goods never actually hit US soil—so nothing shows up in Intrastat either. Plus, Company A doesn't list any exports on their VAT forms since Company B was technically the one handling the exporting. On their outgoing invoices, Company A just marks everything as VAT-exempt under Section 4 of the local tax code.

Case two.
Company A actually has to register for VAT in Canada because that's where they're picking up the goods. From there, they handle exports from Canada to Mexico, all being VAT-exempt per the Canadian Value Added Tax law.

Waiting to see what anyone else thinks...🙂

They’ll show up. Just keep in mind it’s the weekend. 😁

🙂

If Company A is listed as the exporter on the export customs declaration, then Company B can issue a tax-free invoice based on Section 146(1)(b) of the European Union VAT Directive—this means the invoice isn't subject to American VAT and doesn't even need to hit the American VAT records.
Company A will just cite the specific provision on their outgoing invoice stating the goods are exempt from tax under Section 45(1) of the American Value Added Tax law (using that confirmed export customs declaration as proof).

Now, if the exporter on that customs declaration is actually a supplier from Poland, then per Section 146(1)(a) of the European Union VAT Directive, they’ll issue a zero-rated invoice—again, this won't be subject to American VAT or recorded in any American VAT books.
In that scenario, it’s basically treated as if the American company sold those goods to their customer in Mexico from somewhere outside the US—even outside the European Union, for that matter. That sales invoice wouldn't fall under the American Value Added Tax law according to Section 4(1)(1).

No Intrastat required here.

The other scenario—exactly what you laid out—is where there's registration in Canada, and since Company A is handling the export side of things...

Spot on—that’s exactly how I figured it out too... basically, it just comes down to who’s listed as the exporter on the JCD so everything lines up in our domestic records...

The IRS would probably call me just to ask for an explanation on how I filled out my forms. 😁

There’s something here:

http://www.irs.gov/pub/irs-media....aspx?id=19096

you wouldn't call 🤣
where I just finished, everyone was totally messing up and nobody did a thing about it...
they were actually reporting it right in the VAT forms—you know, the IRA and URA ledgers—they just weren't showing it in interstate transactions.
the second case? they acted like the acquisition happened right here in the States, skipped registering in Canada and all that 😁
I'm honestly torn on what to do about the previous stuff—is it even smart to poke the bear or should I just let the App 🤷 I don't know, this App
is just pulling at me more...

It’s hard to say what the move should be when you already know things aren't looking good.
Still, I guess an App might be the more practical way to go here. 😁

Alright, I'll jump in too... just so we can finally wrap this whole thing up... 😉

Patrick Peterson49 said:Since nobody seems interested in a deep dive, here’s what I’ve figured out...

Case one.
Company A isn't showing any EU acquisitions on their US VAT returns or regular tax filings—mostly because the goods never actually hit US soil—so nothing shows up in Intrastat either. Plus, Company A doesn't list any exports on their VAT forms since Company B was technically the one handling the exporting. On their outgoing invoices, Company A just marks everything as VAT-exempt under Section 4 of the local tax code.

Case two.
Company A actually has to register for VAT in Canada because that's where they're picking up the goods. From there, they handle exports from Canada to Mexico, all being VAT-exempt per the Canadian Value Added Tax law.

Waiting to see what anyone else thinks...🙂

Everything looks solid so far, but I should probably add one thing. You've gotta make sure that incoming invoice from the Polish company gets logged in the books as a cost of goods sold in transit. Same goes for the outgoing invoice from the American company—that’s just revenue from goods in transit, which needs to follow the tax rules over in Canada. Since it's all happening like this, none of it actually touches the American tax records, the VAT filings, or the Intrastat reports... turns out it's simpler than it looks...

I don't even know where to start with this mess... just total chaos. It feels like nothing makes sense anymore, honestly. Everything is constantly shifting under our feet and nobody seems to be in charge of actually fixing things. Just constant noise... nothing but noise... says:
Look, if Company A is listed as the exporter on the customs declaration, then Company B can just issue a zero-rated invoice based on Section 146, subsection 1, point b of the VAT Directive. It’s pretty straightforward... that kind of invoice isn't even subject to American VAT, so there's no reason to even touch the American VAT records with it. Just stays off the books... simple as that.
Company A is putting this line on their invoice, claiming the whole delivery is exempt from tax based on some specific section of the US tax code... citing an export customs declaration as proof. Honestly, it’s just one of those things...

I have to admit, this whole thing feels a bit nonsensical to me (not saying I’m definitely right, maybe I’m missing something here too). Just to be clear, I haven't gone through and memorized every single word of Council Directive 2006/112, but that stuff is baked right into our own tax laws under Section 45...

If the exact same directive is baked right into the laws over in Canada, then we can basically just take our own interpretation of the law and map it directly onto theirs... simple as that...

If you actually take the time to sit down and read through this new VAT law... honestly... Export isn't actually exempt from VAT... Look, there's only one way this works... you can get an exemption on a shipment to a third country, but only if the supplier—or someone actually acting on their behalf—is the one handling the dispatch. That's it. Nothing else...

Look, if you actually look at the basic definition of delivery under Section 13, Paragraph 1, the place of supply is wherever the goods are sitting right before they get shipped out. In this case, that means the US... so Company A can't just go around citing Section 45, Paragraph 1 to issue an invoice when the whole transaction isn't even hitting our tax records here. At the end of the day, the goods are declared for export, which means everything gets reported over in the States, not here...

In this situation, Company A would basically have to go ahead and register for VAT in Poland...

Patrick Peterson49 said:Case number one...
Company A is based here in the States, Company B is over in Poland, and Company C is down in Mexico. Here’s the setup: Company A buys goods from Company B, then sells those same goods to Company C. To make it work, Company B ships everything directly from their factory straight to Company C using DAP Mexico terms. Since this is an export declaration leaving the European Union, Company B is technically the exporter, but they actually swap out the paperwork. They use an invoice from Company A instead. We’ve already double-checked this with customs brokers and the local authorities—apparently, that’s just how it goes through at the border. The actual invoice from Company B is only shown for inspection purposes; the end customer isn't supposed to lay eyes on it. On Company B's internal invoice, Company A is listed as the buyer, even though the shipment is headed to Company C. So, where does Company A report this? Is it on the standard VAT return? The VAT-S form? Or something like Interstat?...

The supplier agreed on DAP Mexico terms, which covers transport and customs clearance. Under those terms, Company B is the exporter (exporting in its own name and for its own account—the customs declaration lists them). Company A acquires the goods within a third country.
In this scenario, Company A has no obligation to register for VAT purposes in Poland.

Company B's incoming invoice isn't subject to taxation in the US, so it’s just recorded in the financial books. The outgoing invoice to Company C needs to be issued following US tax regulations, including all elements from Section 79, with a note stating it's not subject to tax under Section 4. It also doesn't need to be included in tax records or VAT forms.

devilgirl said:No Intrastat required.

Exactly.

Richard Howard55 said:Honestly, I'd love for the IRS to call me so I can explain what I actually put in these forms.

There's something here:

http://www.irs.gov/publications/....aspx?id=19096

Just ignore this opinion, because the second part is completely off base. There are still way too many gray areas with these chain deliveries when you look at how the IRS issues official rulings...

Jeremy Anderson63 said:Alright, I'll jump in too... just so we can finally wrap this whole thing up... 😉

Everything looks solid so far, but I should probably add one thing. You've gotta make sure that incoming invoice from the Polish company gets logged in the books as a cost of goods sold in transit. Same goes for the outgoing invoice from the American company—that’s just revenue from goods in transit, which needs to follow the tax rules over in Canada. Since it's all happening like this, none of it actually touches the American tax records, the VAT filings, or the Intrastat reports... turns out it's simpler than it looks...

I don't even know where to start with this mess... just total chaos. It feels like nothing makes sense anymore, honestly. Everything is constantly shifting under our feet and nobody seems to be in charge of actually fixing things. Just constant noise... nothing but noise... says:
Look, if Company A is listed as the exporter on the customs declaration, then Company B can just issue a zero-rated invoice based on Section 146, subsection 1, point b of the VAT Directive. It’s pretty straightforward... that kind of invoice isn't even subject to American VAT, so there's no reason to even touch the American VAT records with it. Just stays off the books... simple as that.
Company A is putting this line on their invoice, claiming the whole delivery is exempt from tax based on some specific section of the US tax code... citing an export customs declaration as proof. Honestly, it’s just one of those things...

I have to admit, this whole thing feels a bit nonsensical to me (not saying I’m definitely right, maybe I’m missing something here too). Just to be clear, I haven't gone through and memorized every single word of Council Directive 2006/112, but that stuff is baked right into our own tax laws under Section 45...

If the exact same directive is baked right into the laws over in Canada, then we can basically just take our own interpretation of the law and map it directly onto theirs... simple as that...

If you actually take the time to sit down and read through this new VAT law... honestly... Export isn't actually exempt from VAT... Look, there's only one way this works... you can get an exemption on a shipment to a third country, but only if the supplier—or someone actually acting on their behalf—is the one handling the dispatch. That's it. Nothing else...

Look, if you actually look at the basic definition of delivery under Section 13, Paragraph 1, the place of supply is wherever the goods are sitting right before they get shipped out. In this case, that means the US... so Company A can't just go around citing Section 45, Paragraph 1 to issue an invoice when the whole transaction isn't even hitting our tax records here. At the end of the day, the goods are declared for export, which means everything gets reported over in the States, not here...

In this situation, Company A would basically have to go ahead and register for VAT in Poland...

The supplier agreed on DAP Mexico terms, which covers transport and customs clearance. Under those terms, Company B is the exporter (exporting in its own name and for its own account—the customs declaration lists them). Company A acquires the goods within a third country.
In this scenario, Company A has no obligation to register for VAT purposes in Poland.

Company B's incoming invoice isn't subject to taxation in the US, so it’s just recorded in the financial books. The outgoing invoice to Company C needs to be issued following US tax regulations, including all elements from Section 79, with a note stating it's not subject to tax under Section 4. It also doesn't need to be included in tax records or VAT forms.

Exactly.

Just ignore this opinion, because the second part is completely off base. There are still way too many gray areas with these chain deliveries when you look at how the IRS issues official rulings...

I have to admit, that line of yours:

"Company A acquires these goods within a third country"

1. provides a crucial link—it's actually what allowed me to start making sense of why those invoices are being swapped at the border.

2. explains why you’re questioning the IMF opinion in the second half.

Besides, how can the Police Department even claim to say:


We note that the IRS is not authorized to interpret the regulations of other member states or Council Directives, though implementation of Council Directive 2006/112/EU is mandatory for all European Union member states.

By that logic, I guess they aren't even qualified to judge business conducted outside the U.S. borders, or whether we handled things correctly or not.

Jeremy Anderson63 said:Alright, I'll jump in too... just so we can finally wrap this whole thing up... 😉

Everything looks solid so far, but I should probably add one thing. You've gotta make sure that incoming invoice from the Polish company gets logged in the books as a cost of goods sold in transit. Same goes for the outgoing invoice from the American company—that’s just revenue from goods in transit, which needs to follow the tax rules over in Canada. Since it's all happening like this, none of it actually touches the American tax records, the VAT filings, or the Intrastat reports... turns out it's simpler than it looks...

I don't even know where to start with this mess... just total chaos. It feels like nothing makes sense anymore, honestly. Everything is constantly shifting under our feet and nobody seems to be in charge of actually fixing things. Just constant noise... nothing but noise... says:
Look, if Company A is listed as the exporter on the customs declaration, then Company B can just issue a zero-rated invoice based on Section 146, subsection 1, point b of the VAT Directive. It’s pretty straightforward... that kind of invoice isn't even subject to American VAT, so there's no reason to even touch the American VAT records with it. Just stays off the books... simple as that.
Company A is putting this line on their invoice, claiming the whole delivery is exempt from tax based on some specific section of the US tax code... citing an export customs declaration as proof. Honestly, it’s just one of those things...

I have to admit, this whole thing feels a bit nonsensical to me (not saying I’m definitely right, maybe I’m missing something here too). Just to be clear, I haven't gone through and memorized every single word of Council Directive 2006/112, but that stuff is baked right into our own tax laws under Section 45...

If the exact same directive is baked right into the laws over in Canada, then we can basically just take our own interpretation of the law and map it directly onto theirs... simple as that...

If you actually take the time to sit down and read through this new VAT law... honestly... Export isn't actually exempt from VAT... Look, there's only one way this works... you can get an exemption on a shipment to a third country, but only if the supplier—or someone actually acting on their behalf—is the one handling the dispatch. That's it. Nothing else...

Look, if you actually look at the basic definition of delivery under Section 13, Paragraph 1, the place of supply is wherever the goods are sitting right before they get shipped out. In this case, that means the US... so Company A can't just go around citing Section 45, Paragraph 1 to issue an invoice when the whole transaction isn't even hitting our tax records here. At the end of the day, the goods are declared for export, which means everything gets reported over in the States, not here...

In this situation, Company A would basically have to go ahead and register for VAT in Poland...

The supplier agreed on DAP Mexico terms, which covers transport and customs clearance. Under those terms, Company B is the exporter (exporting in its own name and for its own account—the customs declaration lists them). Company A acquires the goods within a third country.
In this scenario, Company A has no obligation to register for VAT purposes in Poland.

Company B's incoming invoice isn't subject to taxation in the US, so it’s just recorded in the financial books. The outgoing invoice to Company C needs to be issued following US tax regulations, including all elements from Section 79, with a note stating it's not subject to tax under Section 4. It also doesn't need to be included in tax records or VAT forms.

Exactly.

Just ignore this opinion, because the second part is completely off base. There are still way too many gray areas with these chain deliveries when you look at how the IRS issues official rulings...

Man, you totally lost me there... was this a "one or the other" situation? Why are we bringing Canadian laws into this now?

A= America, B= Poland, C= Mexico

My logic was simply that the supplier is the one shipping the goods—meaning the invoices change—and there's a JFK on the American company...

Honestly, I'm not even sure myself... there are so many different scenarios, and there's nowhere to check things with absolute certainty... so you just have to dig through the laws and ask for advice... we really should all be lawyers!🤣

But hey, more brains always lead to a conclusion eventually—that's why I love this little corner of the internet.😍

Carol Price4 said:Man, you totally lost me there... was this a "one or the other" situation? Why are we bringing Canadian laws into this now?

A= America, B= Poland, C= Mexico

My logic was simply that the supplier is the one shipping the goods—meaning the invoices change—and there's a JFK on the American company...

Honestly, I'm not even sure myself... there are so many different scenarios, and there's nowhere to check things with absolute certainty... so you just have to dig through the laws and ask for advice... we really should all be lawyers!🤣

But hey, more brains always lead to a conclusion eventually—that's why I love this little corner of the internet.😍

God knows how Canada even got dragged into this conversation... 😉

I was just reacting to your scenario where Company A is the exporter (with the JCD issued to them). I figured you were just using that as an example of how things work when Company A is exporting from Poland.

The first case was when Company B is the exporter, and we all pretty much agreed on that part.

Patrick Peterson49 said:Hey, looking for some expert eyes on two different scenarios...

Scenario one:
Company A is based here in the US, Company B is in Germany, and Company C is over in Mexico. Company A buys goods from Company B, then sells those same goods to Company C. To make it work, Company B ships directly from their factory using DAP Mexico terms straight to Company C. We're talking export declarations for when it leaves the European Union—Company B handles the actual export, but they swap out their invoice for an invoice from Company A. Apparently, that’s how it works at customs—we checked with both freight forwarders and customs agents—so Company B's invoice is just shown for review during clearance. The end buyer shouldn't even see Company B's invoice. On Company B's invoice, Company A is listed as the buyer, but it specifies the goods are being delivered to Company C. So, where does Company A report this? The VAT return? The VAT-S form? Intrastat?

Scenario two:
Company A buys goods from Company B in Germany under FCA Canada terms, and then sells them to Company C in Mexico. This involves export declarations when leaving the European Union, but this time, Company A is the one handling the export. Where does Company A need to report this? VAT return? VAT-S form? Intrastat? Or maybe a VAT registration in Canada?

Look, this kind of stuff is a total mess. 😁 Honestly, it smells like one of those fake three-way transactions to me.
I dealt with something almost identical last year, so I actually reached out to the IRS for a ruling.
I sent over all my paperwork to an agent, she gave me a formal response in writing, and I stuck to that like glue.
The details are a bit fuzzy now, but I know it involved tagging things in the VAT form—specifically under the section for supplies from non-resident taxpayers and input tax on goods received from non-residents. Something along those lines, I can't quite recall the exact line item. 🤔

Just call a tax advisor and get a straight answer. At the end of the day, the government might decide to audit you one morning, and you don't want to be caught totally clueless.

If you check the RIPUP journal (that yellow publication 😁) from the 9/2013 issue, there are actual entry examples, including one for a fake three-way deal. Then the 10/2013 issue has a whole article on VAT regarding chain transactions.
Shoot me a DM and I'll send those articles over to you. Might help clear the fog.

🤷I need some advice here.
I sent an invoice to a company in Canada, and they paid me in Euros directly into my foreign currency account. I gave them a call to let them know the goods are ready to go.
But now they’re telling me to ship everything to their local branch here in the States.
The original invoice was, naturally, tax-exempt.
What’s the smartest move? Should I transfer the funds from my export account to my domestic one and issue a standard invoice including sales tax
to the local branch, then have them settle the difference with the Canadian office through some sort of internal arrangement?

Hi everyone! I urgently need some help here. We are a non-profit institution (which means we're VAT exempt) and we're currently issuing an invoice for a taxable service to a company located within the European Union. Should I be including VAT on this invoice, or is there a way to claim a refund? Thanks!

I'm trying to figure out the best way to handle an invoice here... specifically, how do I determine who actually needs to be registered for sales tax?
So, my LLC is based here in the US, and we just finished up some service work for a private individual over in the European Union. Our US firm covered both the materials and the labor upfront. What's the right way to go about rebilling those costs along with the service fee?

Kate Perez10 said:I'm trying to figure out the best way to handle an invoice here... specifically, how do I determine who actually needs to be registered for sales tax?
So, my LLC is based here in the US, and we just finished up some service work for a private individual over in the European Union. Our US firm covered both the materials and the labor upfront. What's the right way to go about rebilling those costs along with the service fee?

If you're registered for sales tax, you've gotta charge it on services provided to folks within the European Union.

Carol Price4 said:If you're registered for sales tax, you've gotta charge it on services provided to folks within the European Union.

So, assuming the LLC is set up for sales tax... does that mean we calculate everything here in the US and just list it right there on the tax return form?

Hello

I need some guidance regarding invoicing and sales tax regulations.
Our company is registered for sales tax, and we recently purchased a used vehicle from overseas—specifically, a net price transaction within the USA.
Now, we are planning to resell that same vehicle back to another state within the USA, also at a net price.

Which specific legal code should be cited on our invoice?
For brand-new vehicles, the rules seem clear under Section 41, Subsection 1, Paragraph b)

However, can I simply cite Paragraph a) under that same section?
Or would it be more appropriate to reference Section 95, Subsection 1, Paragraph a)?

We are only responsible for paying the tax on the margin—the difference between our purchase price and the final sale price!

Thanks