Doing business with USA member states

restlessnomad10 said:Yeah, even the instructions say you should list services provided by taxpayers from third countries, but then they go and throw in taxpayers from the USA too.
Specifically, the guidance for section II.12 states that you enter the value of received supplies where the provider isn't based here in the States (meaning a taxpayer based in the USA or a third country), and where the recipient is responsible for calculating and paying the sales tax according to Article 75, paragraph 2 of the law.

And for section II.10, they say: Enter the value of the service received from another state and the amount of sales tax at the 25% rate that the recipient taxpayer needs to calculate and pay in accordance with the provisions of Article 75, paragraph 1, point 6 of the law.

Of course, Article 75 references a bunch of other sections... and honestly, that's where I lose the thread. I am completely lost here... 😵

This stuff drives me absolutely insane.
One article points to this section or that subsection, and by the time I’ve scrolled back and forth trying to find it, I’ve completely forgotten what the hell I was even reading about in the first place. 🙂
It all just blurs together into one giant mess. 😲
I’ve got a seminar this Friday, so I’m just going to write down a list of questions on paper. I'll shove the paper right in their faces the second I walk through the door and make them deal with it. Hopefully, they actually give me some real answers.

Edit: oh yeah, my first shipment headed out to Austria today. Fingers crossed I didn't forget anything.

What happens if I’m running a small business and I'm not registered for sales tax, but I end up invoicing someone outside the USA? Say, someone in Mexico?
What kind of info needs to be on the invoice—and should I just bill them in USD?

ruggedmaker2 said:This stuff drives me absolutely insane.
One article points to this section or that subsection, and by the time I’ve scrolled back and forth trying to find it, I’ve completely forgotten what the hell I was even reading about in the first place. 🙂
It all just blurs together into one giant mess. 😲
I’ve got a seminar this Friday, so I’m just going to write down a list of questions on paper. I'll shove the paper right in their faces the second I walk through the door and make them deal with it. Hopefully, they actually give me some real answers.

Edit: oh yeah, my first shipment headed out to Austria today. Fingers crossed I didn't forget anything.

Come on, please let us know what you find out!😉

Look, I was just venting to some colleagues in my industry—we handle both B2B and B2C services—and honestly, nobody has any intention of changing a single thing. They’re going to keep billing everyone exactly the same way they always have, whether it's local clients, people from other countries, or folks within the European Union. Everything stays subject to VAT, and there’s absolutely no plan to implement a reverse charge mechanism for B2B transactions. When I brought this up, they just stared at me like I had two heads...

Anyway, I’ve been sitting here waiting for the official VAT regulations to be released because I assumed they would finally clarify what actually counts as proof that someone is a legitimate tax resident in a non-EU country. But from what I can see, there isn't a single word about it in the regulations. Did I somehow miss a section?
RIF No. 7 states: "The fundamental principle of taxing services based on the recipient's tax seat also applies when services are provided to taxpayers located outside the European Union, and regulation 282/2011 specifies when a user located outside the European Union may be considered a taxable person." Can someone please help me out here? Has anyone actually figured out what kind of supporting documentation I need to hold onto to justify a reverse charge for a third-country partner under Article 17, Paragraph 1?

Richard Howard55 said:I just copied this directly from Council Regulation (EU) No 282/2011
(which implements Directive 2006/112/EC

(18) Properly applying the rules regarding the place of
service delivery mostly depends on whether the customer is a tax
payer or not, and in what capacity they are acting. To
determine if a customer qualifies as a tax payer, the provider
must establish what kind of documentation they are required to obtain
as proof from their customer.

When those Canadians didn't ask for anything, maybe it was back in 2011 (before March 15th), before this Regulation even existed.

It says here that the provider has to determine what kind of proof they need to get from their customer.
I guess we'll just have to wait for the Treasury regulations, since that’s probably where this will actually be settled.
At some seminars, they mentioned something about a certificate the buyer has to pull from their own (third) country to prove they're a registered taxpayer there.
They put it more elegantly at the seminar: "one must obtain certification from the tax authority of the state where the service recipient is registered as a taxpayer."

The whole "tax authority of the state" bit... I get that, I guess... but everything else is just total gibberish to me.

Anyway, circling back to this, apis, did you manage to figure anything else out? The regulations don't mention a thing, yet at the seminar, they told us to hold off until the formal guidelines are released to settle this...😕 So what am I supposed to do with these clients in Mexico🤷—calculate VAT for them and let them get ripped off? ☕
P.S. But seriously, those Americans didn't ask me for a single thing, even after this regulation was passed, and we were still considered a third country to them.🤷

The Treasury Department issued an opinion on June 14, 2013. Here is what it says:

1. Shipments to the DC involving transport (dispatch)

When shipping goods from the US to the DC, you first have to check the VIES database to confirm if the recipient is a registered VAT taxpayer. You need to do this before every single shipment using the website http://ec.europa.eu/taxation_customs/vies/. Every single time, you must print out and save the confirmation showing the recipient is a registered VAT taxpayer in the DC for audit and inspection purposes. This is the supplier's only proof that they can apply the "reverse charge" mechanism, where the recipient handles the tax reporting for goods coming from the US.
- If goods are being shipped to a registered VAT taxpayer in any part of the DC with proof of transport, the US-based supplier in the VAT system doesn't charge VAT (it won't show up on the invoice, as it is exempt), and they must include a mandatory note on the invoice stating "reverse charge."

...so it looks like for every invoice sent to other VAT taxpayers within the European Union, besides the "VAT exempt..." clause, we should probably just write "reverse charge," right?

The same applies to acquisitions from the European Union; they need to put that on the invoice so it qualifies as an acquisition for us.

Since I’ll be handling one or two invoices for goods being shipped to other USA states this year—specifically Austria (maybe even Italy)—and because my budget didn't exactly allow for attending any professional seminars, I've been left to figure this out on my own. After some digging, here is my current understanding of the process:

1. I have my own tax ID number.
2. I need to verify the tax ID of my business partner over in Austria.
3. My invoice needs to clearly state both my tax ID and the buyer's tax ID from Austria.
4. I'm still a bit stuck on where exactly the legal reference for VAT exemption needs to go on the invoice—specifically regarding Section 41, Paragraph 1, Point A.
5. These transactions should be reported under Section I of the VAT return.
That includes shipments that aren't subject to taxation and are exempt under Section 3.
6. By the 20th of each month, I need to file the standard VAT return along with the summary report for all interstate goods and services within the USA.
7. If there were no such shipments during a given month, then no summary report is required.

If anyone here is more experienced or has actually sat through those professional training sessions, could you please set me straight if I've misinterpreted anything? Or feel free to add whatever else I might have missed.

Thanks in advance!!

Maybe you could just put it in plain text after the line items? Like, for each individual item, you could give it a number (a bookmark or whatever) and then just explain what those numbers mean in a separate section at the end of the invoice

It’s kinda wild how people—when they actually have a choice and aren't being told what to do by some higher power—suddenly hit this mental wall and just freeze up, I guess

My first shipment to the second FBI office went off without a hitch—fingers crossed it actually arrives safe and sound—so here’s a little update
🙂🙂
Moving right along...
I'm not even going to bother wasting my breath on all those forms before the seminar. I'll just show up with a list of questions and hope that makes me look halfway competent.

Nicole Lee6 said:Look, I was just venting to some colleagues in my industry—we handle both B2B and B2C services—and honestly, nobody has any intention of changing a single thing. They’re going to keep billing everyone exactly the same way they always have, whether it's local clients, people from other countries, or folks within the European Union. Everything stays subject to VAT, and there’s absolutely no plan to implement a reverse charge mechanism for B2B transactions. When I brought this up, they just stared at me like I had two heads...

Anyway, I’ve been sitting here waiting for the official VAT regulations to be released because I assumed they would finally clarify what actually counts as proof that someone is a legitimate tax resident in a non-EU country. But from what I can see, there isn't a single word about it in the regulations. Did I somehow miss a section?
RIF No. 7 states: "The fundamental principle of taxing services based on the recipient's tax seat also applies when services are provided to taxpayers located outside the European Union, and regulation 282/2011 specifies when a user located outside the European Union may be considered a taxable person." Can someone please help me out here? Has anyone actually figured out what kind of supporting documentation I need to hold onto to justify a reverse charge for a third-country partner under Article 17, Paragraph 1?

So, I’m back at it again, digging through paperwork, and I stumbled upon this bit in the RIPUP:
When dealing with service recipients from so-called third countries—meaning nations outside the European Union—under the provisions of Article 18, point 3 of Regulation 282/2011, the service provider can assume the recipient based outside the European Union is a taxable person, unless they know otherwise:

a) if the service recipient provides a certificate from the competent tax authority in the country where they are registered for VAT, which is typically issued by that authority when requesting a VAT refund in a European Union member state under Directive 86/560 / EEC (the so-called Thirteenth Directive),

b) when the recipient doesn't have that specific certificate, but the service provider has their VAT identification number or a similar ID assigned in the country where they are based or headquartered—something used to identify business entities—or any other proof of their status as a taxpayer, provided the supplier performs a reasonable check on the accuracy of the info provided, using standard commercial safeguards like identity verification or payment checks.

Am I reading this correctly? If I’m operating as a major taxpayer and my entire client base consists solely of other big players who are already registered for sales tax, does that mean the thresholds for supply and acquisition basically become irrelevant for me? Like, I don't have to stress about monitoring those limits or dealing with the headache of registering for tax in other states... please, someone tell me I don't have to deal with that.
Thanks,

Karen Smith34 said:Anyway, I'll ask one more time: has anyone actually heard back from the IRS with their number?

Yeah, we actually got ours a few days ago. The IRS just sent it over to us directly.

We finally handed in our application for a Sales Tax ID last Thursday, and honestly, the clerk at the IRS office just stared at me with this blank look on her face. It was like I was speaking a foreign language; she had absolutely no clue what I was trying to accomplish with that paperwork or even who I was supposed to be submitting it to. So, now we just sit here and wait to see if they actually grant us the number or not—I guess we'll just have to wait and see. 🤷

ruggedmaker2 said:So, I’m back at it again, digging through paperwork, and I stumbled upon this bit in the RIPUP:
When dealing with service recipients from so-called third countries—meaning nations outside the European Union—under the provisions of Article 18, point 3 of Regulation 282/2011, the service provider can assume the recipient based outside the European Union is a taxable person, unless they know otherwise:

a) if the service recipient provides a certificate from the competent tax authority in the country where they are registered for VAT, which is typically issued by that authority when requesting a VAT refund in a European Union member state under Directive 86/560 / EEC (the so-called Thirteenth Directive),

b) when the recipient doesn't have that specific certificate, but the service provider has their VAT identification number or a similar ID assigned in the country where they are based or headquartered—something used to identify business entities—or any other proof of their status as a taxpayer, provided the supplier performs a reasonable check on the accuracy of the info provided, using standard commercial safeguards like identity verification or payment checks.

I think I'll just tell them to follow this bolded part instead. 🤷

jadenomad24 said:Since I’ll be handling one or two invoices for goods being shipped to other USA states this year—specifically Austria (maybe even Italy)—and because my budget didn't exactly allow for attending any professional seminars, I've been left to figure this out on my own. After some digging, here is my current understanding of the process:

1. I have my own tax ID number.
2. I need to verify the tax ID of my business partner over in Austria.
3. My invoice needs to clearly state both my tax ID and the buyer's tax ID from Austria.
4. I'm still a bit stuck on where exactly the legal reference for VAT exemption needs to go on the invoice—specifically regarding Section 41, Paragraph 1, Point A.
5. These transactions should be reported under Section I of the VAT return.
That includes shipments that aren't subject to taxation and are exempt under Section 3.
6. By the 20th of each month, I need to file the standard VAT return along with the summary report for all interstate goods and services within the USA.
7. If there were no such shipments during a given month, then no summary report is required.

If anyone here is more experienced or has actually sat through those professional training sessions, could you please set me straight if I've misinterpreted anything? Or feel free to add whatever else I might have missed.

Thanks in advance!!

Did I get this right?

jadenomad24 said:Did I get this right?

Yeah, 🙂

I’m still a little fuzzy on the whole VAT form situation since I haven't sat down to dig through the fine print yet. No rush, though—the deadline isn't breathing down my neck just yet.

Just don't forget, besides all the specific requirements for invoices laid out in the Value-added tax law, you’ve gotta make sure you're hitting everything else required by other federal regulations too.

On top of that, you need solid proof that you're actually shipping to a business entity and that the goods have officially crossed into another VAT zone.
Basically, on the day of delivery, just print out a verification from the relevant database for that customer, stash it in your files along with the invoice, and attach all the paperwork—like a signed delivery receipt or whatever else counts as official documentation.

Hi everyone! I’m a bit stuck on what needs to be listed on export invoices for shipments to other countries... specifically, which article should I cite for a delivery to a place like Mexico? I've completely lost my train of thought on this one.
Thanks so much!!!!

Thanks, Darcy!

Douglas Nguyen30 said:Hi everyone! I’m a bit stuck on what needs to be listed on export invoices for shipments to other countries... specifically, which article should I cite for a delivery to a place like Mexico? I've completely lost my train of thought on this one.
Thanks so much!!!!

It would actually be incredibly helpful if someone could share an EXAMPLE of an invoice for a domestic sale versus an export shipment—say, to Mexico—if anyone has already handled that. It might save us all from asking the same repetitive questions over and over again.

It’s tough to give you a concrete example of what an invoice looks like because everything depends on who’s sending it—whether it’s some massive corporation, a small local contractor, or just some guy running a side hustle—and what they’re actually billing for, like goods versus services or whatever margins are involved.
On top of that, federal regulations dictate the bare minimum requirements for an invoice, but beyond that, you can pretty much toss in whatever extra details you need based on how you run your business or what you've hashed out with your partners.
For our shipments to other distribution centers, we go way overboard and include a ton of stuff the law doesn't even require. We’ll throw in the contract or purchase order number, product codes from our internal database, draft numbers, the full delivery address down to the specific warehouse unit, item counts, net and gross weights in pounds, tax IDs, and all that good stuff.

At the end of the day, you can tailor your invoices however you want, as long as you hit those basic legal requirements.