Doing business with USA member states

Betty King7 said:Thank you so much, but here is the reality of the situation: I received the invoice. The vehicle was purchased under the company name, yet the invoice was issued without sales tax, despite there being no mention of a tax liability transfer. The invoice was dated in October; it clearly lists the tax IDs for both parties, and the seller is definitely a registered entity in the system. However, our firm hasn't submitted the application for our own federal tax ID yet.
The vehicle is already running, registered, and all fees are paid. What am I supposed to do now? Does anyone actually take these invoices down to the IRS?
I will certainly file the application for the tax ID, but the approval won't come until November. Can I not include this car purchase in the October sales tax filing? Is this madness? Please... I need advice...

And also, what rate should I be calculating? Is it 25% or what?

Betty King7 said:And also, what rate should I be calculating? Is it 25% or what?

Yeah, 25%. Was that actually used? Everything I mentioned before was regarding used vehicles—I’m not totally sure if the rules are the exact same for brand-new ones.

p.s. Don't stress out too much, it's really not that big of a deal. Just file the request. If they didn't charge the sales tax on the invoice—meaning they didn't cross-check you against the IRS database—then that's on them. It's their oversight, not yours. It's not like the end of the world; the company was still a registered taxpayer when the invoice went out. Personally, I'd just include it in the October filing. Even over in Germany, they submit that report this way so everything aligns up eventually. 😁

Plus, the IRS website doesn't even specify when you officially became a taxpayer or when you were added to their registry, so... ;-)

Drew Rogers6 said:Yeah, 25%. Was that actually used? Everything I mentioned before was regarding used vehicles—I’m not totally sure if the rules are the exact same for brand-new ones.

p.s. Don't stress out too much, it's really not that big of a deal. Just file the request. If they didn't charge the sales tax on the invoice—meaning they didn't cross-check you against the IRS database—then that's on them. It's their oversight, not yours. It's not like the end of the world; the company was still a registered taxpayer when the invoice went out. Personally, I'd just include it in the October filing. Even over in Germany, they submit that report this way so everything aligns up eventually. 😁

Plus, the IRS website doesn't even specify when you officially became a taxpayer or when you were added to their registry, so... ;-)

And finally, I received some information—hopefully accurate—that you can only obtain a sales tax ID for amounts exceeding $10,000.00.

So, I was digging through the IRS website earlier, and they actually have a whole section dedicated to everything you need to know about vehicle procurement:
http://www.irs.gov/pub/irs-rst/vehicle-procurement-guide.aspx

Betty King7 said:And finally, I received some information—hopefully accurate—that you can only obtain a sales tax ID for amounts exceeding $10,000.00.

But wait—if you aren't in the VIES database, the Germans aren't even allowed to issue an invoice without VAT, though apparently you don't need to be registered if the delivery value stays under $26.

Mistie Maria — she won't be able to file her VAT returns for the 10-month period because the IRS portal will just kick it back—it’ll throw an error saying the taxpayer doesn't have a valid VAT ID for that timeframe, so yeah, that option is totally out...

Carol Price4 said:But wait—if you aren't in the VIES database, the Germans aren't even allowed to issue an invoice without VAT, though apparently you don't need to be registered if the delivery value stays under $26.

Mistie Maria — she won't be able to file her VAT returns for the 10-month period because the IRS portal will just kick it back—it’ll throw an error saying the taxpayer doesn't have a valid VAT ID for that timeframe, so yeah, that option is totally out...

So, what you're saying is that regardless of whether a company is registered for sales tax or not, we don't need a tax ID if the vehicle purchase stays below $25667?
I've tried reading up on this, but frankly, I'm lost. From what I gathered, does this only apply to companies that aren't part of the sales tax system?
This is my first time doing business within the European Union.
What am I even supposed to do at this point?

When exactly does an intra-European Union acquisition of goods trigger a VAT liability and the subsequent reporting obligation? How on earth are we supposed to determine the fair market value for goods or services? And who, exactly, is going to be auditing the accuracy of the tax base in business dealings between entrepreneurs within the European Union?

The duty to account for VAT during an intra-European Union acquisition arises at the moment the invoice is issued. If no invoice has been issued by then, the obligation kicks in no later than the fifteenth day of the month following the one in which the taxable event occurred.

A taxpayer acquiring goods within the European Union reports this transaction via their standard VAT return and through the specific report for acquisitions of goods and services from other European Union member states. These acquisitions are reported in the returns corresponding to the accounting period in which the invoice was issued. In cases where no invoice has been received, the acquisition is reported in the returns for the month immediately following the month the taxable event took place.

Determining market value becomes necessary when goods or services are provided to individuals with family ties or other close personal connections to the taxpayer. This also applies when there are financial or legal links involved—think employer-employee relationships, family connections, or ties based on membership, management, or ownership.

Generally, for intra-European Union acquisitions, the price stated on the invoice is accepted unless there is concrete evidence that the amount is incorrect. The tax base for an intra-European Union acquisition is determined using the same methods applied to domestic supplies of those same goods. The IRS will utilize all available business documentation to conduct audits regarding acquisitions of goods from other European Union member states within the US.

I found this information on the IRS website. My invoice was issued at the end of October, but I didn't receive it until November, and everything regarding the vehicle was being finalized in November—technically speaking, everything else too. Does this mean I can record the vehicle purchase in my November VAT returns once I finally receive my VAT identification number? Also, is it mandatory for the IRS to stamp the invoice? Can I just take it to them at the end of the month to get some kind of official confirmation?

Betty King7 said:When exactly does an intra-European Union acquisition of goods trigger a VAT liability and the subsequent reporting obligation? How on earth are we supposed to determine the fair market value for goods or services? And who, exactly, is going to be auditing the accuracy of the tax base in business dealings between entrepreneurs within the European Union?

The duty to account for VAT during an intra-European Union acquisition arises at the moment the invoice is issued. If no invoice has been issued by then, the obligation kicks in no later than the fifteenth day of the month following the one in which the taxable event occurred.

A taxpayer acquiring goods within the European Union reports this transaction via their standard VAT return and through the specific report for acquisitions of goods and services from other European Union member states. These acquisitions are reported in the returns corresponding to the accounting period in which the invoice was issued. In cases where no invoice has been received, the acquisition is reported in the returns for the month immediately following the month the taxable event took place.

Determining market value becomes necessary when goods or services are provided to individuals with family ties or other close personal connections to the taxpayer. This also applies when there are financial or legal links involved—think employer-employee relationships, family connections, or ties based on membership, management, or ownership.

Generally, for intra-European Union acquisitions, the price stated on the invoice is accepted unless there is concrete evidence that the amount is incorrect. The tax base for an intra-European Union acquisition is determined using the same methods applied to domestic supplies of those same goods. The IRS will utilize all available business documentation to conduct audits regarding acquisitions of goods from other European Union member states within the US.

I found this information on the IRS website. My invoice was issued at the end of October, but I didn't receive it until November, and everything regarding the vehicle was being finalized in November—technically speaking, everything else too. Does this mean I can record the vehicle purchase in my November VAT returns once I finally receive my VAT identification number? Also, is it mandatory for the IRS to stamp the invoice? Can I just take it to them at the end of the month to get some kind of official confirmation?

You can't book that invoice in November.
At the moment the acquisition actually happened, you weren't verifiable in the VIES system, which means the Germans weren't legally allowed to transfer the tax liability over to you.
As a rule, you need to have a valid VAT ID at least 15 days before delivery or acquisition; without it, they can't shift the tax burden onto your books.

The Germans messed up because they should have charged their own local sales tax. It’s a headache, I know. But you didn't technically have an "acquisition" to report. You had a purchase in Germany, and the fact that they failed to charge you tax—even though they were supposed to—is their mess to clean up, not yours.

You mentioned it’s a used vehicle. Was this handled under the special margin scheme for used goods?

Henry Edwards33 said:You can't book that invoice in November.
At the moment the acquisition actually happened, you weren't verifiable in the VIES system, which means the Germans weren't legally allowed to transfer the tax liability over to you.
As a rule, you need to have a valid VAT ID at least 15 days before delivery or acquisition; without it, they can't shift the tax burden onto your books.

The Germans messed up because they should have charged their own local sales tax. It’s a headache, I know. But you didn't technically have an "acquisition" to report. You had a purchase in Germany, and the fact that they failed to charge you tax—even though they were supposed to—is their mess to clean up, not yours.

You mentioned it’s a used vehicle. Was this handled under the special margin scheme for used goods?

There are no notes listed... How am I supposed to verify that?
What now? Do I just leave everything off the sales tax return but still record the vehicle as a fixed asset based on the invoice?

Betty King7 said:There are no notes listed... How am I supposed to verify that?
What now? Do I just leave everything off the sales tax return but still record the vehicle as a fixed asset based on the invoice?

Maybe just give the Germans a call and ask? If they're using some special margin taxation scheme, it should be clearly stated on the invoice—same goes if it's a reverse charge situation. Honestly, you could try playing dumb and reporting nothing, but if they file their end, the IRS is going to come knocking on your door to reconcile everything. I dealt with this once where I reported it, but the seller in the USA didn't, and I ended up getting flagged. They cross-reference all this stuff, I think on a quarterly basis. Personally, I'd try filing it for October (assuming they're currently in the IRS database) and if it doesn't go through, hey, you haven't lost anything.

Drew Rogers6 said:Maybe just give the Germans a call and ask? If they're using some special margin taxation scheme, it should be clearly stated on the invoice—same goes if it's a reverse charge situation. Honestly, you could try playing dumb and reporting nothing, but if they file their end, the IRS is going to come knocking on your door to reconcile everything. I dealt with this once where I reported it, but the seller in the USA didn't, and I ended up getting flagged. They cross-reference all this stuff, I think on a quarterly basis. Personally, I'd try filing it for October (assuming they're currently in the IRS database) and if it doesn't go through, hey, you haven't lost anything.

Why should I be the one bending over backwards to fix this when they should be fixing it with me?
Who messed up here? They did. So, let them deal with the fallout.

I don't see why I should have to bow to their mistakes. 🤷

When I make a mistake, I own it and fix it. But in this case, the error lies entirely with them; they failed to verify the buyer in the IRS system and shifted the tax liability without any legal basis to do so. That is the most basic rule of the sale: you verify whether you can actually transfer the tax obligation before you move forward.

If we go the route of "reconciling," since they filed and we didn't, the IRS is just going to call us and demand a statement. We'll end up explaining that we bought a commercial vehicle but didn't have a tax ID yet, and there was no record of acquisition because the supplier couldn't legally transfer the tax burden. They’ll cross-reference the date we received our tax ID against the invoice date.
The other party will face the exact same scrutiny. It'll be determined that the Germans should have charged their own sales tax, meaning they’ll have to correct the error, pay it into the treasury, and then scramble to try and claw that money back from the buyer.

I absolutely refuse to play ball with someone who screwed up. If I’m going to adjust anything, I’m doing it to make things right, not to accommodate a blunder.

And yeah—I’m pissed off. 🙂

Drew Rogers6 said:Maybe just give the Germans a call and ask? If they're using some special margin taxation scheme, it should be clearly stated on the invoice—same goes if it's a reverse charge situation. Honestly, you could try playing dumb and reporting nothing, but if they file their end, the IRS is going to come knocking on your door to reconcile everything. I dealt with this once where I reported it, but the seller in the USA didn't, and I ended up getting flagged. They cross-reference all this stuff, I think on a quarterly basis. Personally, I'd try filing it for October (assuming they're currently in the IRS database) and if it doesn't go through, hey, you haven't lost anything.

We did the exact same thing when we filed the acquisition for a used commercial truck we picked up back in December 2013. The seller was based out of a small town in Oregon. He was just a small-time operator over there, but he had a valid Tax ID, which we verified through the FIFA system. We gave him our US Tax ID, and he noted on the invoice that sales tax wasn't charged per some specific regulation. Since we are registered taxpayers, we filed the acquisition and ended up with an immediate credit, so nothing actually came out of our pockets. The IRS basically just validated the invoice, confirming we needed to report the acquisition for December 2013, and based on that official stamp, we were able to get the truck registered with the DMV.

Now, the IRS is calling us, demanding a formal written explanation as to why we included this in our filings when the guy in Oregon didn't report it on his end. Honestly, how am I supposed to know why he chose not to report it?!?

@ Henry Edwards33
Man, who pissed you off this bad? 🤔
They didn't call me to fix some error I made—that wasn't it. They actually reached out because they wanted to use my paperwork to make it easier to hunt down a supplier who conveniently "forgot" to report their sales. My filing was perfectly fine.

@ Vejanka
It’s the exact same story with me. This agent calls me up and says, "Hey, looking at your VAT regulations filings, you reported something like $167, but the EU suppliers have you listed under ID $133." Then she asks if I can dig up an invoice from $33 so she can go hammer that supplier and demand to know why they haven't reported the sale yet. I'm exaggerating a bit here, but you get the point, right? 😉

Betty King7 said:So, what you're saying is that regardless of whether a company is registered for sales tax or not, we don't need a tax ID if the vehicle purchase stays below $25667?
I've tried reading up on this, but frankly, I'm lost. From what I gathered, does this only apply to companies that aren't part of the sales tax system?
This is my first time doing business within the European Union.
What am I even supposed to do at this point?

You read that correctly; those specific rules apply to companies that aren't currently under the VAT regulations.

Betty King7 said:When exactly does an intra-European Union acquisition of goods trigger a VAT liability and the subsequent reporting obligation? How on earth are we supposed to determine the fair market value for goods or services? And who, exactly, is going to be auditing the accuracy of the tax base in business dealings between entrepreneurs within the European Union?

The duty to account for VAT during an intra-European Union acquisition arises at the moment the invoice is issued. If no invoice has been issued by then, the obligation kicks in no later than the fifteenth day of the month following the one in which the taxable event occurred.

A taxpayer acquiring goods within the European Union reports this transaction via their standard VAT return and through the specific report for acquisitions of goods and services from other European Union member states. These acquisitions are reported in the returns corresponding to the accounting period in which the invoice was issued. In cases where no invoice has been received, the acquisition is reported in the returns for the month immediately following the month the taxable event took place.

Determining market value becomes necessary when goods or services are provided to individuals with family ties or other close personal connections to the taxpayer. This also applies when there are financial or legal links involved—think employer-employee relationships, family connections, or ties based on membership, management, or ownership.

Generally, for intra-European Union acquisitions, the price stated on the invoice is accepted unless there is concrete evidence that the amount is incorrect. The tax base for an intra-European Union acquisition is determined using the same methods applied to domestic supplies of those same goods. The IRS will utilize all available business documentation to conduct audits regarding acquisitions of goods from other European Union member states within the US.

I found this information on the IRS website. My invoice was issued at the end of October, but I didn't receive it until November, and everything regarding the vehicle was being finalized in November—technically speaking, everything else too. Does this mean I can record the vehicle purchase in my November VAT returns once I finally receive my VAT identification number? Also, is it mandatory for the IRS to stamp the invoice? Can I just take it to them at the end of the month to get some kind of official confirmation?

Look, if the car is already registered, the DMV already took that receipt where the certification was supposed to be. If they didn't make a fuss about the missing stamp, then don't you start making a fuss either! It’s way more important to actually report the acquisition than to obsess over getting some official confirmation that you *promised* you'd report the acquisition.😉

Drew Rogers6 said:Look, if the car is already registered, the DMV already took that receipt where the certification was supposed to be. If they didn't make a fuss about the missing stamp, then don't you start making a fuss either! It’s way more important to actually report the acquisition than to obsess over getting some official confirmation that you *promised* you'd report the acquisition.😉

I honestly don't even know what to say. Everything was supposedly handled before it landed on my desk. Maybe there was another copy of the invoice somewhere.
Ultimately, I think Henry Edwards33 is right. What kills me is that the invoice shows absolutely nothing. Not a single hint. How am I even supposed to draw a conclusion from an invoice like this? (No Chargeback, no nothing).
I won't submit anything for now. I'll just wait to see if the IRS calls me, and then I'll explain the situation to them. It’s a disaster if they fail to report it while I do, only for them to call me later and find out I claimed input tax when I didn't even have a VAT ID.
For now, I'll just record the vehicle as an asset based on the invoice and wait to see what happens.

Betty King7, I totally lost my train of thought following your story 😁
Is the vehicle brand new or used? And did someone already handle the VAT regulations on it?
Maybe my brain is just turning to mush because I'm starving—I haven't had a single bite to eat since this morning 😁

Drew Rogers6 said:@ Henry Edwards33
Man, who pissed you off this bad? 🤔
They didn't call me to fix some error I made—that wasn't it. They actually reached out because they wanted to use my paperwork to make it easier to hunt down a supplier who conveniently "forgot" to report their sales. My filing was perfectly fine.

@ Vejanka
It’s the exact same story with me. This agent calls me up and says, "Hey, looking at your VAT regulations filings, you reported something like $167, but the EU suppliers have you listed under ID $133." Then she asks if I can dig up an invoice from $33 so she can go hammer that supplier and demand to know why they haven't reported the sale yet. I'm exaggerating a bit here, but you get the point, right? 😉

Taxpayers. 🙂

I did everything by the book. I sent over all the paperwork and now I’m just sitting around waiting to hear what their next move is. It’s like watching a slow-motion train wreck—they actually admitted we didn't mess anything up, yet they still have the nerve to insist that I'm the one who needs to fix it.
Maybe I’m just being stubborn, but I refuse to go back and fix those old sales tax filings. I know I didn't make a mistake, but here we are at the end of 2014 and I've still got all that 2013 paperwork hanging over my head. Honestly, you can't blame me for being pissed off about it. 😢

ruggedmaker2 said:Betty King7, I totally lost my train of thought following your story 😁
Is the vehicle brand new or used? And did someone already handle the VAT regulations on it?
Maybe my brain is just turning to mush because I'm starving—I haven't had a single bite to eat since this morning 😁

Eat, Zenon. Everything gets a whole lot easier once that final paycheck hits. 😬

"Is anyone else seeing this? Is there any logic left in our system? I’m looking at these recent updates to the VAT regulations and I feel like my head is spinning. It’s just more red tape, isn't it? More hoops to jump through while the IRS watches our every move. Why does everything have to be such a bureaucratic nightmare? Does anyone actually believe this makes things simpler for the average taxpayer?"

ruggedmaker2 Asks: Betty King7, I’ve managed to get myself completely lost in the weeds of your story. 😁 Is the vehicle brand new or used? And has the VAT been settled, or are we looking at an outstanding issue with the IRS? Perhaps my thoughts are just getting tangled because I’m starving. I haven't had a single bite to eat since this morning. 😁

A used vehicle. An invoice issued without tax. No disclaimer included. Is anyone actually surprised? Does anyone honestly believe this passes an audit? It’s a mess. A complete disaster waiting to happen.

Ahaaa. 👍

The way I see it, your vendor is probably using some kind of special margin scheme for their taxes—it looks like they’re following those specific VAT regulations regarding profit margins.

Look, I haven't actually dealt with a situation quite like this in my own work, so I haven't gone down the rabbit hole of studying the fine print, but that's my gut feeling on how it's playing out.