How can I avoid paying sales tax?

value added tax

Sales tax and input tax

As an entrepreneur, you have to collect sales tax with your prices from your customers and pay it to the tax office. As an entrepreneur, you are normally liable for tax if you sell an item or provide a service within the framework of your company: You invoice your customers for sales tax and pay the tax to the tax office. As a rule, the sales tax is therefore cost-neutral for you.

However, sales tax can also be a cost factor for entrepreneurs: If the service performed by you as an entrepreneur is exempt from sales tax, the input tax deduction is regularly excluded.

There are also exceptions to the principle that the supplier pays the sales tax to the tax office. Especially in the construction sector and in business with foreign countries, the tax liability is regularly reversed: It is not the entrepreneur who performs the delivery or service who is liable for the tax, but the buyer / buyer, if he is also an entrepreneur.

The sales tax paid by an entrepreneur when purchasing products or services for his company is called input tax. If you are entitled to input tax deduction, there are no financial burdens for you. Either the input tax reduces the sales tax liability resulting from your own sales or services or the input tax is reimbursed by the tax office.

However, you are only entitled to deduct input tax if you have received an invoice that meets the legal requirements. The following information must be included in the invoice:
  • Name / address of the company performing the service;
  • Name / address of the service recipient;
  • Tax number or VAT ID of the providing entrepreneur;
  • Date of issue of the invoice;
  • consecutive invoice number;
  • Quantity / type of items delivered or scope / type of other service;
  • Time of delivery or other service;
  • Net amount, tax rate and sales tax amount (in the case of sales tax-exempt deliveries or other services, a reference to the tax exemption).

Less strict regulations apply to small-value invoices up to 250 euros including VAT. Enough here
  • Full name and full address of the contractor performing the service;
  • Date of issue of the invoice;
  • Quantity / type of delivered items or scope / type of other service;
  • Gross amount (i.e. the net remuneration including sales tax);
  • applicable tax rate or a reference to a tax exemption.

Tax number and VAT ID no.

When you register your business with the tax office, you will be assigned a tax number. All tax returns that you have to submit, including advance VAT returns, are usually managed under this tax number. Under certain circumstances, you may also have to obtain your own tax number for your company tax returns with another tax office. If your company is in the district of one and your place of residence is in the district of another tax office, the tax office in whose district you operate your company is responsible for the sales tax. Without a tax number, you cannot participate in market events and, in particular, you cannot issue proper invoices.

In addition to the tax number, there is another number: The sales tax identification number - for short VAT ID no. This is only issued on application by the Federal Central Tax Office, either in writing (Federal Central Tax Office, Saarlouis Office, Ahornweg 1–3, 66740 Saarlouis) or via the Internet (www.bzst.de). If you have just started your company, you can only apply once you have received a tax number from the tax office. Therefore you can use the VAT ID no. also apply to the tax office. The "Questionnaire on tax registration" contains a corresponding application field.

Actually, the USt-IdNr. for the intra-community trade in goods and services in the European Union (EU). Entrepreneurs can only deliver tax-free across borders to one another or provide a service if both have a VAT ID number. use.

The good news for you is that you have a choice of which number to use on your bills. In any case, apply for a VAT ID number at the BZSt. So you are on the safe side.

Sales tax advance notification and sales tax declaration

In contrast to income tax, sales tax is a registration tax. This means: As an entrepreneur, you determine the tax yourself. The tax office finds out the amount of sales tax owed and the input tax to be offset with it through your monthly or quarterly advance notifications, if you are obliged to do so, and also through the annual return.

Pre-registrations must generally be submitted by the 10th day after the end of the pre-registration period, i.e. the respective month or quarter. If the 10th day is a Saturday, Sunday or public holiday, you have until the next working day. You can also apply for a permanent extension to the tax office. But then you have to make a special advance payment in advance, which will be offset later.

Payments based on advance notifications are advance payments on the annual sales tax liability. In the annual declaration, all VAT-relevant transactions within the year are summarized and the final billing is made: the amounts you paid based on the pre-registrations are offset against the resulting VAT. Conversely, reimbursements are of course also taken into account. The annual sales tax return must be submitted by May 31. of the following year (from 2019, if the declaration is made for 2018: July 31 of the following year).
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