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Barracuda
12th March 2013, 10:18
I'll be working as a contractor based in the UK for a New York City company. From the HMRC website I have discovered that this work is exempt from VAT. However I can't find out whether I will have to pay or charge any taxes on the US side. Does anyone know where I can find relevant information?

jamesbrown
12th March 2013, 11:08
If this is a B2B relationship via your UK company, it's the same as any other B2B relationship. Your UK company will be taxed in the UK and you, as an individual, will be taxed on residency, presumably in the UK (i.e. you will be living and working here?) BTW, you probably mean that the work is "outside of the scope of VAT" based on the place of supply rules, which is different from being "exempt." You simply note on your invoices that the goods and services are outside of the scope of VAT and do not, therefore, charge it. Your business can still register for VAT, including for the Flat Rate Scheme if it makes sense to do so.

Barracuda
12th March 2013, 11:14
Hi James, thanks for your reply.

I know that my income will be taxed according to UK legislation, but I'm wondering about the US/New York equivalent of VAT liabilities (if there are any). I haven't been able to find out about any but I may have missed some.

You're right, I meant "outside the scope of VAT". Your suggestion about Flat Rate VAT is interesting. Under what circumstances is it a good idea to sign up for that if I what I sell is outside the scope of VAT?

northernladuk
12th March 2013, 11:20
Why is it recently we get one question on a topic and then a raft of others that are almost the same? The sockies getting tired of coming up with unique material?

Barracuda
12th March 2013, 11:23
Why is it recently we get one question on a topic and then a raft of others that are almost the same? The sockies getting tired of coming up with unique material?

Hi northernladuk,

I had a good look through the archives before posting this question (and noticed a number of helpful responses on many matters from your good self) but I didn't see anything addressing this particular issue. If there are some posts specifically addressing New York City sales tax or other relevant liabilties I'd be grateful if you could point me to them. Thanks!

jamesbrown
12th March 2013, 11:55
Hi James, thanks for your reply.

I know that my income will be taxed according to UK legislation, but I'm wondering about the US/New York equivalent of VAT liabilities (if there are any). I haven't been able to find out about any but I may have missed some.

You're right, I meant "outside the scope of VAT". Your suggestion about Flat Rate VAT is interesting. Under what circumstances is it a good idea to sign up for that if I what I sell is outside the scope of VAT?

The sales tax levied by US states applies to the purchase of goods in the US. You are supplying services to a company in the US, not purchasing goods from the US.

If you are raising invoices that are subject to UK VAT, it's worth doing the calculation to see if you benefit from the FRS, and you probably will benefit in that case. Under the FRS, you essentially save the difference between the normal rate of VAT @ 20% and the lower rate imposed by the FRS depending on your industry category (but you cannot reclaim VAT on purchases).

TheFaQQer
12th March 2013, 11:57
If you are providing electronically delivered services to the client, and they have a presence in the UK as well, then the whole contract may not be outside the scope of VAT.

Section 17.8 of the HMRC guidelines (http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_ShowContent&id=HMCE_PROD1_029955&propertyType=document#P994_125123) says that if your "B2B supply is to a customer belonging outside the EC," you are "required to account for UK VAT to the extent that your customer uses and enjoys your services in the UK."

Of course, how you put a price on the extent that the customer uses and enjoys the services in the UK is a difficult one to determine.

TheFaQQer
12th March 2013, 12:10
The sales tax levied by US states applies to the purchase of goods in the US. You are supplying services to a company in the US, not purchasing goods from the US.

That's not true - sales tax is applied to the purchase of goods and some services.

For example, the state of New York clarified in March 1993 whether pre-written software and custom software code was subject to sales tax. Up until that point, custom software code was not subject to sales tax, but now under certain circumstances (eg. modifying or enhancing pre-written software for a specific customer) are now taxable in NY.

Without knowing exactly what the OP is going to be doing for the client, then it's impossible to know whether there is any sales tax due or not.

There is plenty of information about sales tax on the New York State Department of Taxation and Finance website (http://www.tax.ny.gov/bus/st/stidx.htm). In particular, I'd have a look at the Quick Reference Guide for Taxable and Exempt Property and Services (http://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/quick_reference_guide_for_taxable_and_exempt_prope rty_and_services.htm), and if you are going to be working with software, document TSB-M-93 (3) S (http://www.tax.ny.gov/pdf/memos/sales/m93_3s.pdf).

Barracuda
12th March 2013, 12:10
If you are providing electronically delivered services to the client, and they have a presence in the UK as well, then the whole contract may not be outside the scope of VAT.

Thanks, but the client could not be considered to have any UK presence.

Barracuda
12th March 2013, 12:16
There is plenty of information about sales tax on the New York State Department of Taxation and Finance website (http://www.tax.ny.gov/bus/st/stidx.htm). In particular, I'd have a look at the Quick Reference Guide for Taxable and Exempt Property and Services (http://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/quick_reference_guide_for_taxable_and_exempt_prope rty_and_services.htm), and if you are going to be working with software, document TSB-M-93 (3) S (http://www.tax.ny.gov/pdf/memos/sales/m93_3s.pdf).

Thanks, those are helpful links.

jamesbrown
12th March 2013, 12:37
That's not true - sales tax is applied to the purchase of goods and some services.

For example, the state of New York clarified in March 1993 whether pre-written software and custom software code was subject to sales tax. Up until that point, custom software code was not subject to sales tax, but now under certain circumstances (eg. modifying or enhancing pre-written software for a specific customer) are now taxable in NY.

Without knowing exactly what the OP is going to be doing for the client, then it's impossible to know whether there is any sales tax due or not.

There is plenty of information about sales tax on the New York State Department of Taxation and Finance website (http://www.tax.ny.gov/bus/st/stidx.htm). In particular, I'd have a look at the Quick Reference Guide for Taxable and Exempt Property and Services (http://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/quick_reference_guide_for_taxable_and_exempt_prope rty_and_services.htm), and if you are going to be working with software, document TSB-M-93 (3) S (http://www.tax.ny.gov/pdf/memos/sales/m93_3s.pdf).

The only situation that I'm aware of that a US sales tax might apply is if the OP's company had a presence in the US that existed to facilitate the supply goods and services from his UK company within the US. Is that your point? Also, I'm not really sure what distinction you're trying to make between goods and services here. Yes, some services are taxed by some US states (although sales taxes on services are more the exception), but this isn't likely to be relevant to the OPs situation.

TheFaQQer
12th March 2013, 14:24
The only situation that I'm aware of that a US sales tax might apply is if the OP's company had a presence in the US that existed to facilitate the supply goods and services from his UK company within the US. Is that your point?

No, my point is that New York requires tax to be paid on goods and some services which are supplied in the state. That includes some categories of software, which the OP might fall into. Without knowing what the OP does, I can't comment on whether there is NY tax to pay or not - and neither can anyone else, since there are certain exempt services and certain services which are not exempt. Without knowing what the nature of the contract is, and what services are to be supplied to the client, I don't see how you can say one way or the other.


Also, I'm not really sure what distinction you're trying to make between goods and services here. Yes, some services are taxed by some US states (although sales taxes on services are more the exception), but this isn't likely to be relevant to the OPs situation.

I wasn't making a distinction - you were. You said that because the OP was providing services, there was no sales tax applicable. This is incorrect - sales tax applies to goods and some services. I'm not making a distinction at all, but you were:

The sales tax levied by US states applies to the purchase of goods in the US. You are supplying services to a company in the US, not purchasing goods from the US.

jamesbrown
12th March 2013, 16:24
No, my point is that New York requires tax to be paid on goods and some services which are supplied in the state. That includes some categories of software, which the OP might fall into. Without knowing what the OP does, I can't comment on whether there is NY tax to pay or not - and neither can anyone else, since there are certain exempt services and certain services which are not exempt. Without knowing what the nature of the contract is, and what services are to be supplied to the client, I don't see how you can say one way or the other.

I wasn't making a distinction - you were. You said that because the OP was providing services, there was no sales tax applicable. This is incorrect - sales tax applies to goods and some services. I'm not making a distinction at all, but you were:

Obviously, the OP should seek professional advice for a detailed and accurate opinion. That being said, a US state cannot require a foreign corporation to collect and remit sales (and other) tax unless that foreign corporation has a taxable presence in that state. There is a nexus standard for this and, if the OP is operating through a simple IT services company in the UK (without a physical presence in the US or, at the very least, a "significant economic presence"), the OPs company is unlikely to have a taxable presence in any US state. In my view, your provision of the above links (about what goods and services might be taxable in principle) belies a misunderstanding of this. Until a taxable presence is established, it's a waste of time exploring the details of how companies with a taxable presence might be taxed. However, it is a complex area (witness the back-and-forth re: Amazon and other big companies about what constitutes a "significant economic presence" that leads to a taxable presence in a US state), so the OP should feel free to get expert advise.