When you send an invoice that meets all US invoice requirements, it makes your business appear like an American business to your US clients. It also helps your client to process it fast, because it will have all the required information. For you, that means little or no back-and-forth and getting paid promptly.
There are quite a number of things to consider with US invoicing, and these ensure a secured process. With the rapid growth of the global digital economy, new business markets are expanding at quite the same rate, and the digital trend has proven to be of benefit to users, tax collection, and even the government as a whole.
E-invoicing has assisted government authorities to facilitate compliance and tracking fraud more efficiently.
As your business grows, a surge of customs regulations, as well as indirect tax ones like the VAT (Valued-added tax) and GST (goods and services tax), bound to be encountered along supply chain stages.
These are indirect taxes that are imposed on a subnational level as The United States does not have a national sales tax system, each American state has the authority to impose its own sales and use tax subject to constitutional restrictions in the US. Penalties are imposed for failure to timely file a return and pay due taxes. Some states offer special, indirect tax rules which are a type of exemption for occasional or bulk sales.
Read on to learn the minimum requirements when invoicing US clients.
USA Invoice Requirements
An invoice can be used to declare the value of goods or services, and to determine custom duties when shipping. Therefore, the information you provide must be accurate and verifiable.
W9 Form with Your First Invoice
You need to send your first invoice with a W9 form if you are a foreign contractor or business entity. You do not need to attach it to subsequent invoices.
Some businesses may require that you fill and send them a W-9 form before they process your invoice.
Your US client needs the W9 form to file tax returns, and it is necessary that you provide them with one.
Name of Your Company and Business Address
Your invoice must have your company name as well as the business address. Your company name and address must match the details in the W9 form. Otherwise, your client may request you to revise your invoice.
Your Client’s Name and Business Address
You need to include your client’s business name and address in your invoice. This name must be the one that will be on the 1099 tax form, which is sent to the IRS and a copy to you.
If you offered your services at an address that is different from your business address, then you should include that address in your invoice. The address can be included as an alternate address when filing tax returns.
A project address is not necessary if you are delivering products only. Instead, you will provide your client’s shipping address. The shipping address should match the one that the client sent you in their purchase order.
Date, Invoice Number, and Payment Terms
Your invoice should have a date when you created it, a unique number, and the payment terms you expect the client to adhere to. The payment terms are important because they may determine how fast they will pay you.
The date and invoice numbers are important for matching the invoice with the PO, filing, and future reference.
Due Date of the Invoice
The client can choose to pay before the due date or pay later if the terms you set allow them to do so.
You can describe the service rendered, or give the reference number of the product you shipped to the customer in the description.
You can give the number of hours and minutes or you worked, or give the measurements of the product you delivered. The date should be in the mm/dd/yyyy format, while the measurement should be in US units, not the metric system.
Amount in USD
In the case of services rendered, the invoice should have the amount by the line of service, as well as the total amount due.
If the invoice lists products delivered, it should include the total amount per product, total sales tax amount, the sales tax used in the calculation, and the total amount in USD.
Your invoice must include the correct payment information, which your US customer will use to pay you.
Credit Card – Provide a separate form, and preferably a link to your payment processor.
Wire Transfer and ACH Transfers – Provide bank name, your address, account number, and routing number.
US Invoice Format
That is the basic US invoice format for invoicing US clients. If you are going to be invoicing your clients regularly, you do not have to memorize everything.
Also, important to know is those invoice requirements usually do vary from state-to-state and sales tax obligations are significantly influenced by the presence of your company in the state, a standard invoice should always include Company tax ID, registration numbers, the buyer and seller information.
The invoice number is needed for the ERP system referencing. The unit price for goods and services, EIN (employee identification number), as well as a correct description of goods or services, should also be included.
It is imperative to employ accuracy as an invoice that contains wrong information such as billing higher than the contracted rate, billing for services that have not been provided is usually constituted as a fraud. The legality of the invoice needs to be taken into account before any transaction is conducted, and your invoice must reflect the accurate amount due.
For electronic invoices, it is important also to include the level of detail issued in paper records to be equivalent. Since there is no sales tax in the US, there’s no standard rate. It ranges from 2.9% to 7.5% at the state level. Local governments of 35 states impose additional sales tax that ranges from 1% to 5%.
Every entity that is involved in the business of selling actual personal property at retail taxable service is required to register for VAT/GST and other indirect taxes with the state to acquire a sales tax license before making sales or issuing any service.
Sales and use tax returns are required to be filed either annually, semi-annually, quarterly, monthly, or semi-monthly dependent on state requirements. Its frequency is basically based on the taxpayer’s sales volume and amount of tax that the taxpayer collects periodically, exchange rates also vary by jurisdiction.
The US tax administration requires clients to collect information from vendors annually which is why the W9 form is issued as a requirement. It is important to consider the best invoicing practices as this will reflect your company’s standards.
Contact us and we can help you create a customer invoicing solution for different clients from the US, and around the world.