The realities of e-invoicing in the U.S.

E-invoicing rules continue to emerge and evolve around the world. The EU’s VAT in the Digital Age (ViDA) package establishes e-invoicing as the standard invoicing method across that region. As my colleague, Vertex Director of Solutions Marketing Gunjan Tripathi, reports, e-invoicing will become the default for EU-based transactions by July 2030: “Though Member States may permit alternative invoicing formats for domestic supplies, this shift sets a clear expectation that all businesses operating within the EU prepare for e-invoicing as the norm.”  

Approximately 125 billion of the world’s 560 billion annual invoices are now transmitted electronically, according to research conducted by Billentis. That figure will certainly rise as e-invoicing becomes a larger component of global tax compliance.

This regulatory trend begs a big question: Will U.S. companies be subject to e-invoicing rules any time soon? The answer is both a hard “yes” and “almost certainly not.” The hard “yes” is based on the fact that U.S.-based businesses operating in countries with e-invoicing requirements must comply with those rules.  

Doing so is no small task: ERP and accounting systems must be reconfigured, invoice templates need updating and e-invoicing solutions must be implemented and integrated. Cross-functional processes also must be reconfigured. A survey report from EY (which is affiliated with COST) indicates that mid-to-large U.S.-based companies plan to invest at least $10 million individually to comply with global digital tax requirements during the next five years.

The report’s title addresses that big question that I mentioned: Is e-invoicing relevant in the US state sales tax context? The answer is “very unlikely” for several reasons. First, the VAT fraud issues e-invoicing is designed to address do not exist in the U.S. sales tax system, where compliance rates are very high. Second, our system is highly fragmented: states that levy sales taxes have their own highly unique rules and rates, as do cities, counties and special taxing jurisdictions. I can’t imagine the level of coordination a large-scale e-invoicing system would require among the states. Third, the compliance burdens and the costs of implementing e-invoicing for sales taxes would not go over well with U.S. companies, many of their stakeholders, or, for that matter, many legislators.  

That said, the EY-COST-STRI report concludes with an assessment of the digital sales tax collection and remittance processes that various states have experimented with in recent years. This section is well worth reading as are the discussions that focus on clearance, post-transaction reporting and post-audit e-invoicing implementation models.