Doing business with USA member states

ruggedmaker2 said: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.

Does that mean I have no obligation to calculate sales tax or report it on my filings?

ruggedmaker2 said: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.

When a business uses that specific margin tax procedure, they're required to note it right on the invoice. It's not like a standard tax credit transfer where you can sometimes get away without a disclaimer; if we're talking about margins, the instructions have to be explicitly stated.

And yeah, goods handled under that margin tax method don't end up being reported on the standard sales tax filings or the summary returns.

Henry Edwards33 said:When a business uses that specific margin tax procedure, they're required to note it right on the invoice. It's not like a standard tax credit transfer where you can sometimes get away without a disclaimer; if we're talking about margins, the instructions have to be explicitly stated.

And yeah, goods handled under that margin tax method don't end up being reported on the standard sales tax filings or the summary returns.

Well, I’m certainly not reporting anything just yet, so we’ll see what happens. We are dealing with a reseller here, but since there isn't a single clarifying note on the document, I refuse to jump to conclusions prematurely.
Perhaps they included everything necessary in the total, or perhaps they missed the mark entirely? All I have is the net amount on the invoice. Is it better to stay silent than to file an incorrect report? Yes. If I need to fix it later, I will.

On my way, I caught wind of some news: apparently, the Department of Homeland Security didn't even bother asking the IRS for any kind of verification.

If we're talking about a reseller here, then we're definitely looking at a margin scheme tax situation.
The only real headache left is how they handle the note on the invoice; since the seller is operating out of a different DC, they’re just going to write that disclaimer however their specific local tax laws dictate.

[QUOTE=Darsey;52360187]If they’re acting as a reseller, then we’re definitely looking at a margin scheme tax situation.
The real headache is how they note it on the invoice; since the seller is based in a different FBI jurisdiction, they’ll just format that note however their local tax laws dictate.[/QUOTE

I tracked down their website, and based on the business model and the name itself, I'm convinced they're operating as a reseller (their entire inventory consists of used vehicles).
Well, let's just wait and see how this disaster unfolds.[/QUOTE]

I’m still trying to wrap my head around this whole situation, but honestly, I don't think anyone is looking at the bigger picture here. It feels like we're just spinning our wheels while the actual issues go unaddressed. I have a theory—and bear with me, because I know I tend to wander—but if you look at how these policies are being implemented, there’s a clear pattern of inefficiency that borders on the absurd. It isn't just a minor oversight; it's a systemic failure. I was reading some thoughts earlier by Nicole Lee6, and while I see where they're coming from, I can't say I entirely agree with the conclusion. They seem to be overlooking the sheer scale of the bureaucracy involved. You can't just apply a quick fix to something this deeply ingrained in the American system. It requires a much more surgical approach, though I suspect nobody in Washington has the stomach for it. It’s frustrating, frankly. We keep expecting seamless transitions and perfect execution, yet we ignore the fact that the foundation itself is cracked. We need to stop treating these symptoms and start addressing the underlying cause, or we're just wasting everyone's time. Nicole Lee6 says:
Look, I’m not going to go running to the authorities to file a formal complaint just yet; let's just wait and see how this plays out. We're dealing with a reseller here, but since there isn't any explicit disclaimer or warning attached to the listing, I don't see the point in jumping to conclusions prematurely. I prefer to be deliberate about these things rather than making accusations without all the facts on the table.
Maybe they calculated everything they were supposed to, or maybe they missed a few things—honestly, my receipt only shows the net amount. I’m leaning towards not sending anything at all rather than filing an incorrect report. If it turns out I actually need to account for something else, I'll just go ahead and correct it later.

ruggedmaker2 said:If we're talking about a reseller here, then we're definitely looking at a margin scheme tax situation.
The only real headache left is how they handle the note on the invoice; since the seller is operating out of a different DC, they’re just going to write that disclaimer however their specific local tax laws dictate.

We ended up buying a used heavy-duty truck from a reseller, but they didn't bother following any specific margin scheme for the tax calculation. Instead, they just slapped this vague note on the invoice claiming that sales tax wasn't applied based on some obscure section of their local laws. Honestly, I haven't had the time to sit down and actually dig into the fine print yet to see what we're dealing with. I need to figure out if that clause refers to a standard B2B transaction between two registered taxpayers within the USA, or if it’s just a loophole they're using because they qualify as a small business that doesn't have to report sales tax on their invoices at all.
Basically, we made sure to report everything directly to the IRS. When we went down to the local police station, they wouldn't touch the registration process until we produced a formal confirmation from the tax authorities. We had to prove that this was a used commercial truck—you know, the kind of purchase you’re legally obligated to disclose on both your standard tax filings and your IRS documentation. 🤷
To make matters even more infuriating, things actually took a turn for the worse a few months down the line. I got a call from some lady over at the IRS—the very same one who had initially slapped down that confirmation claiming this was a used commercial vehicle—asking me when on earth I was going to bring in the NPS form. Honestly, I had to practically beg her to take a second look at her own paperwork and see what she’d written in the subject line in the first place. 😂 It looks like we were her very first experience with importing used heavy machinery from the USA, and honestly, she just completely lost her cool over it...

Can anyone confirm if I'm getting this right;

1. For an incoming invoice where the tax liability is transferred, do I book that into a specific account for foreign accounts payable?

2. An incoming invoice from abroad—say, Canada—where no tax was charged, the currency is convertible marks, and there’s no customs declaration involved. Does this go into a specific account for non-resident deliveries? Since the invoice amount is in foreign currency without tax, I'd use the mid-market exchange rate on the date of issuance or payment, then calculate the tax based on the standard US rate for whatever was purchased, right?

3. An incoming invoice from Canada, but this one has a customs declaration and is in Euros. Does this get booked under a specific account for import VAT, using accounts like 6 or 4 /221 and 2470 for customs liabilities?

4. An incoming invoice from a US state—let's say a vendor in a neighboring state—where the currency is USD, obviously. I check their status via the IRS; if they're legit, does it go into a special account for interstate goods or services? If tax is shown on the invoice, do I just book the invoice amount at the current exchange rate, apply the local US tax rate, and then try to claim a refund through some sort of VAT refund system?

5. An incoming invoice from a US state, currency is USD, I check with the IRS, they're legit, so it goes into the special account for interstate goods/services—but this time, NO tax is shown on the invoice. Do I just book the invoice amount at the exchange rate and categorize it as non-taxable?

And what happens if those US invoices don't mention a transfer of tax liability, no tax is charged, but the company is definitely registered with the IRS?

🙏🙏

Stela27, you can't just act like that case under point 5 isn't taxable if it actually is... You’ve gotta list it on the sales tax form as an acquisition of goods from the USA at rate x, plus the input tax on those acquisitions at rate x.
(Like, say you bought 4 tons of sheet metal from a supplier in Texas.)
It's not like the invoices coming in from the USA have to say "tax shift" word-for-word. They might use different phrasing, like "tax-free delivery" or something similar. That's because they're following their own state laws or federal guidelines, not ours. 😉
Just read the invoice carefully—even that tiny fine print at the bottom. I bet you'll find it.

David Green642 said:Can anyone confirm if I'm getting this right;

1. For an incoming invoice where the tax liability is transferred, do I book that into a specific account for foreign accounts payable?

2. An incoming invoice from abroad—say, Canada—where no tax was charged, the currency is convertible marks, and there’s no customs declaration involved. Does this go into a specific account for non-resident deliveries? Since the invoice amount is in foreign currency without tax, I'd use the mid-market exchange rate on the date of issuance or payment, then calculate the tax based on the standard US rate for whatever was purchased, right?

3. An incoming invoice from Canada, but this one has a customs declaration and is in Euros. Does this get booked under a specific account for import VAT, using accounts like 6 or 4 /221 and 2470 for customs liabilities?

4. An incoming invoice from a US state—let's say a vendor in a neighboring state—where the currency is USD, obviously. I check their status via the IRS; if they're legit, does it go into a special account for interstate goods or services? If tax is shown on the invoice, do I just book the invoice amount at the current exchange rate, apply the local US tax rate, and then try to claim a refund through some sort of VAT refund system?

5. An incoming invoice from a US state, currency is USD, I check with the IRS, they're legit, so it goes into the special account for interstate goods/services—but this time, NO tax is shown on the invoice. Do I just book the invoice amount at the exchange rate and categorize it as non-taxable?

And what happens if those US invoices don't mention a transfer of tax liability, no tax is charged, but the company is definitely registered with the IRS?

🙏🙏

👍

If we’re talking about this specific margin tax procedure, where does the entry actually go? Does it hit the general ledger, or perhaps the VAT register? Or is the category itself exempt from taxation altogether?

Betty King7 said:If we’re talking about this specific margin tax procedure, where does the entry actually go? Does it hit the general ledger, or perhaps the VAT register? Or is the category itself exempt from taxation altogether?

You have to keep a separate set of records—specifically for the margin tax.
In my accounting software, everything is logged directly within that specific module. It doesn't even touch the standard sales tax filings.

Carol Price4 said:👍

You’ve lost me a bit here. There isn't a separate ledger for imports and another for acquisitions; there is just one single ledger and a special record as outlined in Section 163, Subsection 4 of the Regulations.
Or am I missing something?

Ethan Bailey18 said:You’ve lost me a bit here. There isn't a separate ledger for imports and another for acquisitions; there is just one single ledger and a special record as outlined in Section 163, Subsection 4 of the Regulations.
Or am I missing something?

In Synesis? It exists, it absolutely exists.
The URA calculation for VAT on imports and the
URA for goods acquired from the USA

Drew Rogers6 said:In Synesis? It exists, it absolutely exists.
The URA calculation for VAT on imports and the
URA for goods acquired from the USA

Software can be programmed to do just about anything, but the regulations strictly mandate using a special record.

Ethan Bailey18 said:Software can be programmed to do just about anything, but the regulations strictly mandate using a special record.

But that’s exactly what it is—a specific record of incoming invoices for every category required by law. I don't see where the confusion lies. 🤷

We aren't talking about one giant master ledger; we're talking about a specific set of records for X or Y, which already exists.

Henry Edwards33 said:But that’s exactly what it is—a specific record of incoming invoices for every category required by law. I don't see where the confusion lies. 🤷

We aren't talking about one giant master ledger; we're talking about a specific set of records for X or Y, which already exists.

Lili, you still fired up? Did you go settle things with the IRS yet? 🙂

Drew Rogers6 said:Lili, you still fired up? Did you go settle things with the IRS yet? 🙂

They haven't reached out yet, so I'm assuming it's all settled. 😁

Henry Edwards33 said:But that’s exactly what it is—a specific record of incoming invoices for every category required by law. I don't see where the confusion lies. 🤷

We aren't talking about one giant master ledger; we're talking about a specific set of records for X or Y, which already exists.

But I enter all those purchases into the standard purchase journal following my auditor's instructions. At the end of the month, the only thing used for the sales tax return is a single printout from that journal; everything else is just supplemental documentation.

Ethan Bailey18 said:But I enter all those purchases into the standard purchase journal following my auditor's instructions. At the end of the month, the only thing used for the sales tax return is a single printout from that journal; everything else is just supplemental documentation.

Actually, those are specific records that need to be tracked in their own numerical sequences. They should physically be kept separate from your regular sales logs.

By the end of the month, everything shows up in that month's master sales book; they're just categorized into different columns.

How you handle this in your software really depends on what kind of system you're using. Personally, I maintain several specialized sub-ledgers where I record each specific type of transaction. For example, I have separate books for domestic sales, import tax calculations, and services provided by out-of-state vendors.