Doing business with USA member states

Jeremy Wood64 said:Does anyone actually know how this works? Like, what should I be putting on my invoice if the client is a legal entity from a third country (the USA) but the actual delivery happens within the European Union (Germany)?

I'm trying to figure out if I should mark it as VAT exempt under some specific local rule, or if we're looking at a reverse charge situation here. And if it is reverse charge, whose tax ID am I even supposed to list, since our buyer is based over in the States?

They need to provide the VAT ID for their tax representative in Germany—assuming they’ll be handling the export there—otherwise, just charge our local sales tax.

Carol Price4 said:They need to provide the VAT ID for their tax representative in Germany—assuming they’ll be handling the export there—otherwise, just charge our local sales tax.

Sorry, I’m a little lost here. The goods aren't even leaving the US—they're basically just moving from one US location to another. There isn't an export happening.
The invoice goes from the US to America, and then probably from America to Germany.
Does this mean an American would actually need some kind of European Union VAT number or a tax representative just to sell stuff from within the European Union to another country in the EU?

Hi there,

I was wondering if I could get some help here. I’ve been getting more information lately, and honestly, I’m feeling a bit stuck on how to handle this.
Here’s the situation:
- I have an LLC set up here in the US (and I have a VAT ID number)
- My client is based over in the United Kingdom (they also have a VAT number)
- The work I do is service-based—specifically, I’m a programmer. To give you a better idea, I develop and maintain software for their hardware. They aren't actually the end users of my service. It’s kind of like they manufacture smartphones, and I build the operating system that runs on them before they sell the finished product.

Since I'm still pretty new to all this, I’m curious about what exactly needs to be listed on my invoice.
For instance, if we agreed that my services would cost £1,000, am I understanding this correctly? Should I list $1,250 on the invoice (that's the £1,000 plus 25% for our local sales tax), show the amount in both USD and GBP, and then include that "reverse charge" note on the bill (something like Exempted from VAT pursuant to art. 17. par. 1. of the US Value Added Tax Act. – Reverse charge)? And by doing that, will they be able to claim a credit for the tax paid?

Thanks so much for any insight you can share.

Casey Sanchez8 said:Hi there,

I was wondering if I could get some help here. I’ve been getting more information lately, and honestly, I’m feeling a bit stuck on how to handle this.
Here’s the situation:
- I have an LLC set up here in the US (and I have a VAT ID number)
- My client is based over in the United Kingdom (they also have a VAT number)
- The work I do is service-based—specifically, I’m a programmer. To give you a better idea, I develop and maintain software for their hardware. They aren't actually the end users of my service. It’s kind of like they manufacture smartphones, and I build the operating system that runs on them before they sell the finished product.

Since I'm still pretty new to all this, I’m curious about what exactly needs to be listed on my invoice.
For instance, if we agreed that my services would cost £1,000, am I understanding this correctly? Should I list $1,250 on the invoice (that's the £1,000 plus 25% for our local sales tax), show the amount in both USD and GBP, and then include that "reverse charge" note on the bill (something like Exempted from VAT pursuant to art. 17. par. 1. of the US Value Added Tax Act. – Reverse charge)? And by doing that, will they be able to claim a credit for the tax paid?

Thanks so much for any insight you can share.

You've got two things clashing here because you can't both charge sales tax yourself and use the reverse charge method at the same time. If you go with reverse charge (meaning you include that specific legal note), you're basically shifting the tax responsibility over to the buyer, so you don't charge any US sales tax on the invoice! You just list the $1,000 price and that little note you mentioned. The big assumption here is that their tax ID is valid in the VAT registration database.

You'll also need to make sure you record this properly on your tax filings for the IRS.

The client will (hopefully 😬) handle sending the right paperwork over in the UK. They might have to pay UK taxes there, or maybe not (it depends on whether they're actually in the local tax system or not). But honestly, that's not your problem to worry about.

(p.s. why didn't you just ask an accountant? 😁)

Jeremy Wood64 said:Sorry, I’m a little lost here. The goods aren't even leaving the US—they're basically just moving from one US location to another. There isn't an export happening.
The invoice goes from the US to America, and then probably from America to Germany.
Does this mean an American would actually need some kind of European Union VAT number or a tax representative just to sell stuff from within the European Union to another country in the EU?

Exactly. If you don't have a valid VAT number within the European Union, you can't transfer the tax liability because there's no one to pin it on—so you'd end up having to charge US Value Added Tax instead.

Kate Adams7 said:You've got two things clashing here because you can't both charge sales tax yourself and use the reverse charge method at the same time. If you go with reverse charge (meaning you include that specific legal note), you're basically shifting the tax responsibility over to the buyer, so you don't charge any US sales tax on the invoice! You just list the $1,000 price and that little note you mentioned. The big assumption here is that their tax ID is valid in the VAT registration database.

You'll also need to make sure you record this properly on your tax filings for the IRS.

The client will (hopefully 😬) handle sending the right paperwork over in the UK. They might have to pay UK taxes there, or maybe not (it depends on whether they're actually in the local tax system or not). But honestly, that's not your problem to worry about.

(p.s. why didn't you just ask an accountant? 😁)

Thanks for clarifying... I thought it worked that way, which is what my accountant told me too. But a colleague threw me for a loop when he sent over an example of his own invoice; I saw sales tax listed right there, even though he had that note at the bottom...
But thinking about it logically, it doesn't make sense to state that something isn't taxable and then go ahead and charge it anyway...
Still, I like to double-check everything from a few different angles. Thanks again... 🙂

Hello,
I was hoping someone might be able to weigh in on a bit of a dilemma for me—specifically regarding tax implications. If a business isn't currently registered for sales tax and they start bringing in inventory from overseas, is that actually alright? Or does the act of acquiring goods from abroad trigger a requirement to register for sales tax in the US?
Thanks 🙂

Arthur Hall said:Hello,
I was hoping someone might be able to weigh in on a bit of a dilemma for me—specifically regarding tax implications. If a business isn't currently registered for sales tax and they start bringing in inventory from overseas, is that actually alright? Or does the act of acquiring goods from abroad trigger a requirement to register for sales tax in the US?
Thanks 🙂

Not necessarily—not until you hit that $26 annual threshold. Once you cross that line, you absolutely have to get a sales tax ID, send it over to your supplier, and then handle the 25% sales tax on those purchases for the US.

Carol Price4 said:Not necessarily—not until you hit that $26 annual threshold. Once you cross that line, you absolutely have to get a sales tax ID, send it over to your supplier, and then handle the 25% sales tax on those purchases for the US.

Thanks🙂
So, once I get my Sales Tax ID, am I looking at filing monthly sales tax returns and reports where the only thing actually being reported is the reverse charge tax?
And for all my other outgoing invoices, does that mean I don't charge any sales tax, nor do I claim input tax credits—I just settle the reverse charge amount?
What happens if there isn't any taxable acquisition in a given month... do I just file empty sales tax returns and reports?

Alright, listen up. So, this small business owner—a total corporate taxpayer—just went out and bought some office gear for their branch over in the Czech Republic. The kicker? They paid the bill using their own personal bank account online. The invoice was in Euros, and once you convert it back to Dollars, the amount is way more than $1667. Now they're stuck. What’s the move here??? How on earth do they pay themselves back without making a mess of the books?

Here is the situation I am facing:
My director ordered a monitor from a vendor based in Canada (they hold a valid US tax ID too). Since this was an online purchase, he didn't enter our US Tax ID during checkout—he just used our standard business ID. As a result, the invoice was issued with a 25% sales tax already baked in, and the director paid the full amount including that tax. Once I received the bill, I reached out to the team in Canada. I explained that we should provide our Tax ID so they could issue a corrected invoice without the tax, since as a registered business entity, we are entitled to a tax-free purchase if our ID is provided.
Their response was essentially: "You can record the purchase as is and then file for a tax refund through the appropriate US government agencies. Unfortunately, we cannot modify the order or the payment to be tax-free at this stage."
What should my next move be? How do I properly record this in the books and report it for our tax filings?

If I’m invoicing a Canadian taxpayer (headquartered in Canada) using the reverse charge mechanism, and they have a valid VAT ID that's also registered in the American VAT system, am I good to go?

Hey there

Got a question that might sound pretty basic, but I figured I'd ask

So, here’s the deal: I picked up Product X here in California and paid $33 plus $8.25 sales tax, bringing the total to $42.

Now, I’m looking at exporting this exact same product to China, and potentially over to Germany down the road.

Is it possible to issue the invoice in USD without including any US sales tax?

Also, what happens to the sales tax I already handed over to my local supplier? Is there any way to claw that back?

Thanks

Taylor White10 said:Hey there

Got a question that might sound pretty basic, but I figured I'd ask

So, here’s the deal: I picked up Product X here in California and paid $33 plus $8.25 sales tax, bringing the total to $42.

Now, I’m looking at exporting this exact same product to China, and potentially over to Germany down the road.

Is it possible to issue the invoice in USD without including any US sales tax?

Also, what happens to the sales tax I already handed over to my local supplier? Is there any way to claw that back?

Thanks

Look, your records always need to show the official US currency, but you can tack on USD or whatever else you want after that—just make sure the primary amount is clear (you can probably hide that in tiny print since nobody’s actually made a rule about it yet 😉 )
.
As for the rest, it all depends on whether you're registered for sales tax or not, who your customers are, and all that jazz. Go back and dig through the old posts in this thread; the answer is buried in there somewhere.
Though, if you're shipping to China, they aren't part of the USA 😉, so you aren't making a domestic sale—you're exporting. That changes everything. You'll have to deal with all the usual export paperwork. (A freight forwarder can usually handle that headache for you).

ruggedmaker2 said:Look, your records always need to show the official US currency, but you can tack on USD or whatever else you want after that—just make sure the primary amount is clear (you can probably hide that in tiny print since nobody’s actually made a rule about it yet 😉 )
.
As for the rest, it all depends on whether you're registered for sales tax or not, who your customers are, and all that jazz. Go back and dig through the old posts in this thread; the answer is buried in there somewhere.
Though, if you're shipping to China, they aren't part of the USA 😉, so you aren't making a domestic sale—you're exporting. That changes everything. You'll have to deal with all the usual export paperwork. (A freight forwarder can usually handle that headache for you).

Thanks for the reply

I'm going to take that little jab about China not being in the USA as pure sarcasm 🙂

I've got the whole export, freight forwarding, and shipping paperwork side of things handled.
My actual question was strictly about the sales tax component—specifically, whether I get that money back (since I am registered for sales tax) if I pay it to my supplier in California and then turn around and sell those goods either here in the USA or over to China, or if that's not how it works.

That bit about the invoice needing to be in USD is pretty wild to me. From what I've seen with a manufacturing firm that ships products all over the globe, they issue their invoices exclusively in USD. 🤔

Sorry, but I've combed through about ten pages of this thread and I'm not seeing a straight answer... basically, most people are just buying from overseas. 🙂

Taylor White10 said:Thanks for the reply

I'm going to take that little jab about China not being in the USA as pure sarcasm 🙂

I've got the whole export, freight forwarding, and shipping paperwork side of things handled.
My actual question was strictly about the sales tax component—specifically, whether I get that money back (since I am registered for sales tax) if I pay it to my supplier in California and then turn around and sell those goods either here in the USA or over to China, or if that's not how it works.

That bit about the invoice needing to be in USD is pretty wild to me. From what I've seen with a manufacturing firm that ships products all over the globe, they issue their invoices exclusively in USD. 🤔

Sorry, but I've combed through about ten pages of this thread and I'm not seeing a straight answer... basically, most people are just buying from overseas. 🙂

Yeah, you can. You claim it as an input credit and offset it against what you owe.
If your credits end up being higher than what you owe, you can either request a refund via direct deposit or just use it to cover other taxes you owe the IRS.

Just make sure the invoice is in US dollars, per Section 81 of the Sales Tax Law.
The people out there cutting corners on that probably haven't even realized they're breaking the rules yet. 😉

Hi there!
I could use some help. I have an invoice for goods purchased from Austria. Both our tax ID and theirs are listed on it, but they actually charged us sales tax. What should I do about this invoice?🤦

Thanks!

redgardener52 said:Hi there!
I could use some help. I have an invoice for goods purchased from Austria. Both our tax ID and theirs are listed on it, but they actually charged us sales tax. What should I do about this invoice?🤦

Thanks!

Request a new one showing the tax liability transfer.😁

casualorca5 said:Request a new one showing the tax liability transfer.😁

Thanks. I guess my accounting department just received this invoice dated from last year, and when I called the vendor, they said it’s too late to change anything. Maybe I should just record it in the goods acquisition ledger from the USA and calculate our 25% sales tax on the gross amount? Should I include it in the sales tax filing or not?🤔
Thanks.

redgardener52 said:Thanks. I guess my accounting department just received this invoice dated from last year, and when I called the vendor, they said it’s too late to change anything. Maybe I should just record it in the goods acquisition ledger from the USA and calculate our 25% sales tax on the gross amount? Should I include it in the sales tax filing or not?🤔
Thanks.

Does anyone happen to be able to help me out with this?🤔