For a U.S. person or business that sold to, or bought from, a foreign business or person $500 or more in certain services or intellectual property (“IP”) during the U.S. entity’s fiscal year ending in 2017, June 29, 2018 is the general filing deadline for submitting to the U.S. Department of Commerce, Bureau of Economic Analysis (“BEA”), a mandatory economics survey (Form BE-120). The Form BE-120 is a once-every-five-years survey conducted by BEA, titled “Benchmark Survey of Transactions in Selected Services and Intellectual Property with Foreign Persons[,]” which gathers information to help BEA’s economists better understand the current contours of international trade. See Form BE-120.
To be a required respondent, a U.S. person or business needed to purchase or sell certain covered services, or IP (as in a patent, trademark, copyright, trade secret, and/or license rights thereof, including rights to use (e.g., rights to use software)) during fiscal year 2017. In fact, the survey form has been expanded specifically to collect additional detail on IP transactions. The relevant regulation lists the broad scope of covered services, which can mostly be characterized as professional or trade skill in nature. Notably, the list includes (but is not limited to) accounting, data storage, education, engineering, architectural, legal, telecommunications, construction, mining, surveying, financial, marketing, and “[a]rtistic-related” services. 15 C.F.R. § 801.11(d). It is a far-reaching list, which makes a broad swath of U.S. persons and businesses potential required respondents. However, the regulation makes clear that physical goods, electricity, employee income, financial instruments, and income from financial instruments are NOT covered by the survey. See 15 C.F.R. § 801.11(e).
In filling out the form, if the U.S. person or business had more than $2 million in fiscal year 2017 foreign sales of IP or covered services, or more than $1 million in foreign purchases of the same, the form requires the respondent to detail countries and the relationships to the foreign entities involved. Note that the mandatory filing and reporting may be based on foreign sales, purchases, or both. Below those thresholds, the BEA generally only seeks total sales and purchase numbers (rounded in thousands of dollars). Further, because the form requires purchases of less than $500 to be rounded down, $500 is the practical reporting threshold. See Form BE-120 at 6. However, ascertaining the numbers can be a little tricky if the sales or purchases occurred through a third party intermediary.
Although the general filing deadline for the BE-120 is Friday, June 29, 2018, the regulations allow a filer until Monday, July 30, 2018, if the person or business files through the BEA’s efile system. See 15 C.F.R. § 801.11(f). There is also a procedure to seek an extension, if necessary. Failure to timely report can result in up to a $25,000 fine, and, if egregious enough, possible jail time. See 22 U.S.C. § 3105; 15 C.F.R. § 801.6.
For more information on the BEA’s surveys under the amended International Investment and Trade in Services Survey Act of 1976, we suggest that you check out our recent blog on BEA’s foreign direct investment benchmark survey, available here.
Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. The author has provided the links referenced above for information purposes only and by doing so, does not adopt or incorporate the contents. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.
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