Doing business with USA member states

Alright, thanks.

I didn't go to school for law, accounting, or business or anything like that, but even I can’t believe the absolute level of incompetence I’ve run into at the government agencies I’ve been dealing with over the last two days.

From what I’ve gathered regarding this exact scenario, you don't need to worry about paying tax on the acquisition of goods up until $25667, but when it comes to acquiring services, you definitely have to account for and pay the sales tax.

Who on earth told you that you don't have to pay? And what was their reasoning?

I had someone tell me the exact same thing, claiming that services aren't treated the same way as acquiring assets.

The real kicker is that if this info is wrong, you’re looking at a massive headache with the IRS coming after you for unpaid sales tax.

I spent way too much time digging through manuals, and honestly, I was totally confused. One guide made it seem like I definitely owed money, but then I stumbled onto some blog post specifically mentioning that $70,000 threshold saying you don't need to pay anything.

Now I’m just stuck. I have no idea who to even reach out to. Every time I call the local IRS office, I can't get anyone on the line who actually knows about this specific issue. I even tried hunting down an email for the specialized VAT authority online, but no luck so far.

It’s such a bizarre situation. According to the standard sales tax laws, I shouldn't even be considered a taxable entity, yet here I am being told the law requires me to pay when I'm not even registered as a business.

It feels like there has to be some logical loophole where this particular rule doesn't apply, maybe some other provision or regulation that kicks in instead.

Justin Myers7 said:From what I’ve gathered regarding this exact scenario, you don't need to worry about paying tax on the acquisition of goods up until $25667, but when it comes to acquiring services, you definitely have to account for and pay the sales tax.

It really comes down to looking at each case on its own merits.
Since there's a valid Tax ID on file for John, the responsibility for calculating and paying the sales tax falls within the US.
If he didn't have one—which could happen up until $25667 the acquisition—then the supplier would have to charge their local sales tax, and he'd just pay it directly on the invoice.

Ultimately, it's up to the supplier to verify if that Tax ID is valid and then act accordingly.

Let's just set the whole sales tax debate aside for a second. I suppose you could argue that I’d end up with an invoice reflecting Spanish taxes, but my real headache is why the "experts" in this field keep insisting that I shouldn't have to pay anything at all. Look, if someone over in Spain issues an invoice without tax, that’s on them, not me—I’m not looking to get involved in their accounting mess since the receipt itself is perfectly valid.

Anyway, there is no way this should be interpreted differently every single time. It feels like that $70,000 threshold rule is being twisted and bent to fit whatever narrative someone wants to push at any given moment...

Laura Castillo6 said:Let's just set the whole sales tax debate aside for a second. I suppose you could argue that I’d end up with an invoice reflecting Spanish taxes, but my real headache is why the "experts" in this field keep insisting that I shouldn't have to pay anything at all. Look, if someone over in Spain issues an invoice without tax, that’s on them, not me—I’m not looking to get involved in their accounting mess since the receipt itself is perfectly valid.

Anyway, there is no way this should be interpreted differently every single time. It feels like that $70,000 threshold rule is being twisted and bent to fit whatever narrative someone wants to push at any given moment...

It isn't a matter of interpretation. Once you register for a VAT ID, you've essentially waived the option to pay foreign sales tax on earnings up to $25667.

It’s pretty straightforward—up to $25667, you get to choose whether you want to deal with overseas sales tax or opt for a US VAT ID and handle everything through our system.
Once your revenue hits $25667 over a two-year period, you have to get that ID and start reporting and paying taxes here.

As for who interprets what, you can argue about that all day, but until someone gives you something in writing saying you don't owe anything, you aren't getting any peace of mind. And let's be honest, you won't get that in writing. 😉

Words are cheap, especially around here.

So, hypothetically speaking, if I were to use that specific ID number to order some goods, I’d end up with an invoice that includes VAT, right? Now, let's say I place an order this month that totals more than, say, $15,000. Does that mean I have to pay the Spanish tax listed on the invoice and then somehow account for the American tax on top of it? Or am I just responsible for paying the 4% difference to the IRS?

Look, if you’re placing orders worth more than $25667, you’ve got to grab that tax ID number. It's not optional.
If the IRS catches you cutting corners on that, you aren't just looking at paying the back taxes—you're getting hit with interest and penalties too. Believe me, they don't play around when it comes to this stuff.

aha. ok.

I am not registered for sales tax and don't have a tax ID.
I'm ordering a service from Germany.

Should I be asking for their tax ID before I place the order, and will I be hit with a 25% sales tax on the service when I acquire it?

Henry Stewart2 said:I am not registered for sales tax and don't have a tax ID.
I'm ordering a service from Germany.

Should I be asking for their tax ID before I place the order, and will I be hit with a 25% sales tax on the service when I acquire it?

Yeah, you definitely need to grab their tax ID at least 15 days before you actually pick up those services from the USA, and once the transaction happens, you'll have to calculate and pay the sales tax yourself and file the appropriate tax forms for that month...

ruggedlynx63 said:Yeah, you definitely need to grab their tax ID at least 15 days before you actually pick up those services from the USA, and once the transaction happens, you'll have to calculate and pay the sales tax yourself and file the appropriate tax forms for that month...

But then they're automatically pulled into the sales tax system, aren't they? What if someone actually wants to stay outside of that system?

It isn't that they don't have to ask for a tax ID if they aren't in the system, similar to how things work under IRS guidelines $0.00, but the crucial part is ensuring that the service doesn't have any foreign sales tax bundled into it
.

Aaron Peterson17 said:But then they're automatically pulled into the sales tax system, aren't they? What if someone actually wants to stay outside of that system?

It isn't that they don't have to ask for a tax ID if they aren't in the system, similar to how things work under IRS guidelines $0.00, but the crucial part is ensuring that the service doesn't have any foreign sales tax bundled into it
.

The $77,000 threshold applies to goods—if it's a service, you definitely need that Tax ID...

You can actually hold a Tax ID without being fully registered in the sales tax system.

Man, what a crazy flood of information we're getting today...

If we're looking at my specific situation to draw some conclusions: for anything under $77 $0.00, you basically get to choose whether you want to pay the sales tax based on where the supplier is located or just stick with the standard US sales tax. If you don't provide a tax ID, the supplier is definitely going to charge you their local rate. Once you cross that $77 threshold $0.00 (assuming within the same calendar year), you really need to provide a tax ID so everything gets calculated under the US tax system.

Even though it sounds pretty straightforward when you say it out loud, once you actually start digging through the official manuals for doing business within the USA, it feels like everyone interprets the rules differently.

Plus, there's a big distinction between providing a service and selling physical goods—they fall under totally different regulations.

When you're doing business within the USA, you’ve got to nail down where the tax hit is happening before you even bother cracking open a law book.

Depending on what kind of services you're providing, an American entrepreneur might actually have to go through the headache of registering for sales tax in another state.

If you want to get this right, you need to be crystal clear about who's doing the work, what exactly they're doing, and where it's physically happening. You have to figure out what counts as the "place of delivery" and check if you fall under any specific exemptions or weird special tax rules, otherwise, you're just flying blind.

The IRS website is packed with all sorts of official interpretations and rulings, so honestly, that should be your first stop before you lose your mind.

I’ve got a client on a quarterly VAT filing schedule who started importing from the USA back in April, and they already have an EIN.
Do I keep filing their returns on a quarterly basis, or am I now required to switch them over to monthly filings along with the specific import forms?

slycobra7 said:I’ve got a client on a quarterly VAT filing schedule who started importing from the USA back in April, and they already have an EIN.
Do I keep filing their returns on a quarterly basis, or am I now required to switch them over to monthly filings along with the specific import forms?

Once you start doing business with the USA, you're definitely on the hook for monthly tax filings and those import statements...

Okay, we settled my first case above.

Now I have a second one, and it's the exact opposite. 🙂

A firm from Denmark reached out to me wanting to pay some money for advertising on my website. It's a digital service, but it doesn't fall under the category of reproducible goods, so it isn't covered by that directive from January 1, 2015, which specifically laid out how sales tax should be handled.

To be clear, I am not registered for sales tax, though I do have an EIN.

The Danish company asked for my EIN, obviously, so we wouldn't have to charge each other sales tax—basically, I send them an invoice for 500 pounds, and they just pay the 500 pounds.

If I were registered for sales tax, this wouldn't be an issue. But since I'm not, I can't operate that way.

From what I understand (correct me if I'm wrong), in this scenario, I would still be required to collect American sales tax at 25%, even though I'm not in the system, just because the tax has to be paid somewhere.

Or, I could just issue them an invoice for 500 without any tax, and then they are responsible for handling the Danish sales tax (also 25%) when they acquire the service, and it's not really my concern whether they actually pay it or not?

I’ve gone through most of the threads on this forum, but I still haven't found an answer.

Someone else has to handle the sales tax here because I don't have an EIN, so we can't do business without charging tax.

I can't charge sales tax myself since I'm not registered in the tax system.

Based on that, I guess I should just issue an invoice for the service value, excluding tax, and the party receiving the service in Denmark is responsible for reporting it and paying the 25% Danish sales tax themselves.

Do I need to write REVERSE CHARGE on the invoice?

Should I be asking them for their EIN to include on my invoice?

Is the tax for this digital advertising service paid at the place of delivery or the place of acquisition?

Do I actually need an EIN, or could I just issue this invoice without one?

🙂

REQUESTING ASSISTANCE
Could someone please provide clarity on this specific scenario?
An American trucking company provides transport services in Austria. They issue an invoice on a monthly basis. For example,
the total invoice amount is $10,000.00, but along with that outgoing invoice, they attach various expenses incurred while operating in Austria—such as tolls, tunnel fees, fuel, etc.—totaling, say, $8,000.00.
The resulting payment to the foreign currency account is $2,000.00. However, the Austrian client refuses to accept any sort of set-off or compensation. How should this business transaction be recorded within the VAT books and the KPI?
Should the VAT return and sales tax filings reflect the full $10,000.00 since that is the face value of the outgoing invoice? Furthermore, regarding the KPI entries: if the Austrian client won't agree to a formal offset, can we perform a unilateral compensation by issuing an invoice for the incurred Austrian expenses? Essentially, the client only pays the difference ($10,000.00 - $8,000.00 = $2,000.00), yet the fuel and other operational costs are billed directly to the American trucking company, which is then seeking a VAT refund through an agency in Austria.

Thank you in advance.