Sales tax for services in the USA
June 18, 2015 | 50,00 EUR | answered by Anton Pernitschka
I am a freelance software developer and offer project-specific customizations ("consulting") for my custom software also abroad. The software is self-programmed, the customers are always entrepreneurs. Now I need details regarding the USA. I have been able to find out that I have to invoice net, so the service is not taxable in Germany, but how and where does the VAT have to be paid in the USA? Do I have to register for taxation there?
I also offer my custom software as a web service for use, the server is located in Germany, the customer uses the service for their own products in the USA; payment is made monthly. Is this also a service (my tax office has confirmed this through the custom software) or is there a tax difference compared to the consulting?
I have heard that the details depend on the state, here are the states of the customers: State of California, Nevada, and Washington. (Maybe there is a list for all states somewhere?)
Dear inquirer,
Within the scope of an initial consultation and based on your fee payment, taking into account the regulations of this forum, I would like to answer your questions.
Based on the facts, you are providing other services for tax purposes (custom software and web software). An other service provided to a business entity is deemed to be carried out at the place where the recipient operates their business, according to § 3a para. 2 UStG. In this case, the recipients of the other services operate their businesses in the USA: therefore, your turnover is not subject to German taxation.
If you are unable to pass on the tax burden to the recipients, you are responsible for forwarding the tax to the US state. You must register in the states where you provide services, in this case in California, Nevada, and Washington.
You can find an overview of the sales tax rates for the individual states in the USA at www.sales-tax-national-and-international.com/.../appendixUSA. For example, the state tax rate for California is 6%, local tax rates are 0 - 2.75%, for Nevada 4.25% or 0 - 3.125%, and for Washington 6.5% or 0.5 - 2.4% (as of 03.01.2005). Please inquire about the currently valid tax rates from the relevant authorities of the states.
The response is based on your description of the facts. Missing or incorrect information about the actual circumstances may affect the legal outcome.
Sincerely,
Anton Pernitschka
Tax advisor (in Germany)
