Doing business with USA member states

Henry Edwards33 said: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.

Thanks, Henry. My developer can't seem to make that happen, so I end up putting everything into one ledger just to ensure the totals land in the right column at month-end. To compensate, I’ve built my own Excel spreadsheets that mirror the official regulatory formats for special records. I track everything there separately and then just attach that printout to the standard sales tax ledger at the end of the month.
Hopefully, the IRS won't breathe down my neck over this. The numbering sequence is unique and everything is physically separated; they just happen to be visible on the standard sales tax report.🤔

Good day to everyone,
I am currently navigating a complex tripartite transaction and would appreciate some insight from anyone with experience in this area.

The setup is as follows: Company A is based in Denmark, Company B is our firm here in the US, and Company C is an American shipping company whose vessel (where the goods are being delivered) is currently docked at a port in Italy. The cargo moves directly from Company A to Company C, but physically ends up at that Italian port.
Company A issues an invoice to Company B (us), and subsequently, Company B issues an invoice to Company C.

Regarding the outbound invoice from Company B to Company C:
1. What specific language should I include in the notes section of the invoice? Since the vessel remains in international waters, we have previously noted that VAT is not charged in accordance with the provisions of Section 47, subsection 1 of the Value Added Tax Act. Is this still the correct approach?
2. In which specific line item of the VAT return should this be reported?
3. Does this invoice need to be included in the Collective return?

Regarding the inbound invoice from Company A to Company B:
1. Should the Unbilled Receivables Account (URA) appear on the VAT return? Since this does not constitute a standard acquisition of goods, I am uncertain which category it belongs under.

Does this scenario qualify as a tripartite transaction?

Thank you very much for your assistance.

I’m feeling a bit stuck regarding the NPS forms, so I’d really appreciate some guidance from my colleagues...
I am currently dealing with an acquisition of vehicles (motorcycles) from the USA intended for resale here in the States. These bikes are 2008 models. The buyer is a registered business with a valid tax ID, so everything is perfectly standard and above board. They purchased these vehicles on December 4, 2014, from another firm based in the USA.

Regarding the Value Added Tax Act, I know I need to file the return including the VAT for the period of December 2014 through January 20, 2015. However, the question is: do I actually need to complete the NPS? My main point of confusion is that since these are 2008 models and clearly aren't "new," I'm not entirely sure how to proceed without accidentally overlooking a specific requirement.

Brenda Chase3 said:I’m feeling a bit stuck regarding the NPS forms, so I’d really appreciate some guidance from my colleagues...
I am currently dealing with an acquisition of vehicles (motorcycles) from the USA intended for resale here in the States. These bikes are 2008 models. The buyer is a registered business with a valid tax ID, so everything is perfectly standard and above board. They purchased these vehicles on December 4, 2014, from another firm based in the USA.

Regarding the Value Added Tax Act, I know I need to file the return including the VAT for the period of December 2014 through January 20, 2015. However, the question is: do I actually need to complete the NPS? My main point of confusion is that since these are 2008 models and clearly aren't "new," I'm not entirely sure how to proceed without accidentally overlooking a specific requirement.

Just to answer this myself—and hopefully help anyone else who might be wondering—if you are acquiring a vehicle specifically for the purpose of resale, you don't need to worry about the NPS. You simply handle the VAT and the VAT return.

Per Section 2 of Article 184 of the VAT Regulations.

With the updates to the Value Added Tax Act starting January 1st, 2015, one thing stands out:

For electronic services provided to non-taxable individuals—basically regular folks—the place of service is considered to be wherever that person lives, works, or hangs their hat. This includes stuff like website hosting, remote software maintenance, delivering computer programs or updates, providing access to databases, images, texts, or info, selling music, movies, and games (yeah, even gambling), broadcasting all sorts of shows—political, cultural, sports, you name it—and even distance learning.

So, from what I gather, this means if someone is selling music—like an MP3 download—to citizens across the USA, they’ll have to charge the specific VAT rate for whichever state the buyer is actually in, since those buyers can't claim any tax credits.

If that's really how it works... say a guy is running a site and taking payments through PayPal, how is he supposed to know where his customers are located? And if he can't track them, how is he even meant to figure out which tax rate to apply??

The only way I can see this working is if the customer manually selects their country during checkout, but that feels like such a huge loophole for people to mess with—not to mention the massive headache and cost of redesigning a whole website just to accommodate this.

Am I totally missing something here??

Carol Price4 said:With the updates to the Value Added Tax Act starting January 1st, 2015, one thing stands out:

For electronic services provided to non-taxable individuals—basically regular folks—the place of service is considered to be wherever that person lives, works, or hangs their hat. This includes stuff like website hosting, remote software maintenance, delivering computer programs or updates, providing access to databases, images, texts, or info, selling music, movies, and games (yeah, even gambling), broadcasting all sorts of shows—political, cultural, sports, you name it—and even distance learning.

So, from what I gather, this means if someone is selling music—like an MP3 download—to citizens across the USA, they’ll have to charge the specific VAT rate for whichever state the buyer is actually in, since those buyers can't claim any tax credits.

If that's really how it works... say a guy is running a site and taking payments through PayPal, how is he supposed to know where his customers are located? And if he can't track them, how is he even meant to figure out which tax rate to apply??

The only way I can see this working is if the customer manually selects their country during checkout, but that feels like such a huge loophole for people to mess with—not to mention the massive headache and cost of redesigning a whole website just to accommodate this.

Am I totally missing something here??

But how are you actually supposed to verify whether a buyer is a registered business or just a regular consumer?

And more importantly, how is a company expected to adjust their software if they're running sales through third-party platforms or intermediaries?

It’s honestly such a nonsensical situation that it actually gives me a headache.

The way things are shaping up, even businesses that aren't part of the VAT system are being forced to charge their clients based on the tax rates in the client's home country. So, you have people who aren't even registered for VAT, but if they want to keep doing business with "regular" companies within the USA—take a web hosting provider, for example—they'd basically be forced to join the VAT system just for that purpose, regardless of how much they're actually trading internationally. 😵

I'm definitely not buying into this logic. 😁

Anthony Davis72 said:But how are you actually supposed to verify whether a buyer is a registered business or just a regular consumer?

And more importantly, how is a company expected to adjust their software if they're running sales through third-party platforms or intermediaries?

Look, businesses are going to ask for an Invoice for their records—that’s easy enough... but when you've got individuals paying via PayPal, that's a whole different ballgame. Honestly, though, they just blindly write these laws without ever actually talking to anyone working in the real world...

Hey, I’ve been digging around but I can’t find anything, so what's the deal for us small construction contractors looking to pick up some side gigs over in Austria?
If anyone could break down exactly what paperwork I need to get my act together, I'd really appreciate it.

I’m hoping someone can point me in the right direction here... I run a small family farm registered for sales tax, specializing in mushroom production. We actually import the specific substrate needed for growth from a supplier over in the US. For instance, they might send us an invoice for around $750, which I record in a separate ledger for intra-community acquisitions and then file my sales tax returns accordingly. What I’m really struggling with is this:
How does this process transition once everything gets rolled into the final KPI reporting? I’ve been trying to put together the year-end statements, but I feel like I’ve hit a bit of a wall. Essentially, my expenses look disproportionately high because I can't claim a credit for that imported sales tax, so when the figures move into the KPI, only the base amount from the tax filings is being reflected. This is leaving my net income looking like it's deep in the red. Since we have to import this substrate every single month—with each invoice hovering around the $750 to $780 mark—the discrepancy is constant.
Any guidance would be greatly appreciated! If this sounds like a rookie mistake, please forgive me... :-/

Help Needed! 😵 I could really use some advice here 😁😁
Back in 2014, my corporation received a down payment from a customer based in Austria for some goods they ordered. At the time, we issued an invoice for the received deposit to account for the funds.
Fast forward to 2015—this gentleman actually travels all the way to the US to pick up his order from us. Now, he’s asking if we can issue the final invoice to his business instead of him personally, without charging sales tax, and he wants to settle the remaining balance in cash.

Some consultants over at the IMF suggested we send him to the nearest bank so he can pay via a wire transfer instead, then have him sign a declaration stating he's exporting the goods back to Austria, which would allow us to issue the invoice tax-free under Section 41, Paragraph 1.

What’s the best way to handle this without making things a huge headache for the customer??
Is it even legal to issue an export invoice to a European Union member state if the payment is settled in cash?

Thanks

We are looking at a rather convoluted acquisition process here. Let’s break down the first scenario: an American company is purchasing raw materials from a supplier based in the US. The American supplier issues an invoice without sales tax, yet the goods are actually being delivered directly to a different firm located within the US. So, the physical shipment stays within the US borders. Then there is the second case: an American company buys goods from a Spanish supplier and receives an invoice without sales tax from the Spaniard, but the actual delivery takes place in the US. This same merchandise is then invoiced to another company back in America, while the original supplier bills the American entity. In all these moving parts, what is the actual status regarding sales tax?

Austin Brown4 said:We are looking at a rather convoluted acquisition process here. Let’s break down the first scenario: an American company is purchasing raw materials from a supplier based in the US. The American supplier issues an invoice without sales tax, yet the goods are actually being delivered directly to a different firm located within the US. So, the physical shipment stays within the US borders. Then there is the second case: an American company buys goods from a Spanish supplier and receives an invoice without sales tax from the Spaniard, but the actual delivery takes place in the US. This same merchandise is then invoiced to another company back in America, while the original supplier bills the American entity. In all these moving parts, what is the actual status regarding sales tax?

First off, the Mexican supplier should have charged sales tax because the goods didn't properly exit Mexican territory, which is a prerequisite for transferring the tax liability.
Second, we are looking at a three-way transaction (using simplified procedures for transactions involving three USA member states). In this scenario, the initial supplier in Spain doesn't charge tax because the goods leave their country and ownership transfers to another taxpayer.
The first buyer (the US company) issues an invoice with sales tax to a US taxpayer, who then claims it as an input credit here in the States.
When they invoice the Mexican entity, they don't charge tax, but per the regulations, the invoice MUST include specific details under Section 79, Article 1.😛They need to cite the relevant provisions of the Directive and include a note regarding the transfer of tax liability, including the tax ID used for the acquisition and subsequent delivery, the recipient's tax ID in Mexico, and a clear statement that this is a three-way transaction. On the tax return, this is reported under section I.3 for intra-USA deliveries, and a supplemental filing is mandatory.
The Mexican party is responsible for calculating and remitting the sales tax.👍

Here’s another scenario—I don't think this counts as a three-way deal if I'm reading this right. It looks more like four different parties involved here:

A Spanish company ==> sells to American Buyer 1 ==> who sells to American Buyer 2 ==> who finally sells to a Canadian buyer.

1) American Buyer 1 acquires the goods, files their sales tax return / the Spanish company files their customs paperwork.

2) American Buyer 1 sells to American Buyer 2—standard sales tax applies.

3) American Buyer 2 ships to the Canadian buyer, files customs paperwork via reverse charge / the Canadian buyer acquires the goods and handles the sales tax.

I am looking for some guidance here. We are currently registered as quarterly tax filers, and our services are provided exclusively to business clients located in third countries (specifically Canada and Mexico). Given this setup, I need to know if we are required to:

A) Switch our filing frequency to monthly?
B) Register for VAT purposes?

Carol Price4 said:Here’s another scenario—I don't think this counts as a three-way deal if I'm reading this right. It looks more like four different parties involved here:

A Spanish company ==> sells to American Buyer 1 ==> who sells to American Buyer 2 ==> who finally sells to a Canadian buyer.

1) American Buyer 1 acquires the goods, files their sales tax return / the Spanish company files their customs paperwork.

2) American Buyer 1 sells to American Buyer 2—standard sales tax applies.

3) American Buyer 2 ships to the Canadian buyer, files customs paperwork via reverse charge / the Canadian buyer acquires the goods and handles the sales tax.

There's logic there... but how exactly can American A 1 acquire goods that never actually entered the US just to sell them if they haven't left the US?🤔🤔

Carol Price4 said:Here’s another scenario—I don't think this counts as a three-way deal if I'm reading this right. It looks more like four different parties involved here:

A Spanish company ==> sells to American Buyer 1 ==> who sells to American Buyer 2 ==> who finally sells to a Canadian buyer.

1) American Buyer 1 acquires the goods, files their sales tax return / the Spanish company files their customs paperwork.

2) American Buyer 1 sells to American Buyer 2—standard sales tax applies.

3) American Buyer 2 ships to the Canadian buyer, files customs paperwork via reverse charge / the Canadian buyer acquires the goods and handles the sales tax.

There's logic there... but I have questions. How can American A 1 acquire goods that never actually entered US territory? And how does American A 2 claim a delivery for items that never even left the US?🤔🤔

Austin Brown4 said:We are looking at a rather convoluted acquisition process here. Let’s break down the first scenario: an American company is purchasing raw materials from a supplier based in the US. The American supplier issues an invoice without sales tax, yet the goods are actually being delivered directly to a different firm located within the US. So, the physical shipment stays within the US borders. Then there is the second case: an American company buys goods from a Spanish supplier and receives an invoice without sales tax from the Spaniard, but the actual delivery takes place in the US. This same merchandise is then invoiced to another company back in America, while the original supplier bills the American entity. In all these moving parts, what is the actual status regarding sales tax?

I dealt with a nightmare situation once—not quite identical to yours, but close enough to give me gray hairs—so I just called a tax consultant at the IRS.
I faxed over every single invoice and shipping manifest I had, and she finally broke down exactly how the math works.
Honestly, you should do the exact same thing.

The bottom line is you have to track the physical movement of the goods religiously to figure out where the actual delivery point is. That's where people trip up.
Sometimes you end up having to register for tax purposes in a different state or even a different country entirely, so before you dive into this mess, definitely check if the hassle is even worth the money.

Ethan Bailey18 said:There's logic there... but I have questions. How can American A 1 acquire goods that never actually entered US territory? And how does American A 2 claim a delivery for items that never even left the US?🤔🤔

I didn't take it that way at first... I just re-read it, but it’s still pretty vague... it says the goods were delivered to Canada, but it doesn't specify who actually sent them...

It could be some kind of "fake" three-way deal or maybe just a continuous shipment... there just isn't enough detail here to make any real assumptions...

I'm with ruggedmaker2 on this one—it's definitely best to just reach out to a VAT law expert...

Carol Price4 said:I didn't take it that way at first... I just re-read it, but it’s still pretty vague... it says the goods were delivered to Canada, but it doesn't specify who actually sent them...

It could be some kind of "fake" three-way deal or maybe just a continuous shipment... there just isn't enough detail here to make any real assumptions...

I'm with ruggedmaker2 on this one—it's definitely best to just reach out to a VAT law expert...

nezz..but a sham triangular transaction only applies if one of the parties is outside the European Union🤔