The Development of the US E-Invoicing System: Current Status and Future Outlook

Since 1960, when the first system for the exchange of structured data electronically between businesses was developed, up to 2025, the electronic invoicing or e-invoicing system has gained popularity among governments around the globe as a perfect solution to track and monitor B2G, B2B, and B2C transactions.

While many countries have mandated e-invoicing to secure tax reporting and combat tax evasion and fraud, the US has taken a more decentralized approach. Nevertheless, in recent years, a notable shift towards broader adoption and standardization of e-invoicing practices has raised the question of whether the US is on its way to implementing mandatory e-invoicing rules on the federal or state level.

Current Status and Regulatory Landscape

First, although e-invoicing is not mandatory in the US, businesses may adopt and implement e-invoicing systems in their day-to-day operations to increase the efficiency and accuracy of their data and remain competitive in a highly digitalized economy.

The e-invoicing system in the US was developed by the cooperation between the Business Payments Coalition (BPC) and the Federal Reserve. The BPC is an organization that brings together organizations and individuals that have a common goal of promoting wider adoption of e-invoicing among businesses and government officials.

The BPC's work resulted in the launch of the E-invoice Exchange Market Pilot in September 2021, with the support of the Federal Reserve. The pilot program aimed to include as many businesses as possible and create an exchange network for B2B transactions similar to Pan-European Public Procurement Online (PEPPOL).

Following the pilot program's success in the summer of 2023, the BPC and Federal Reserves established the non-profit organization Digital Business Networks Alliance (DBNAlliance) to oversee a new electronic exchange network. As underlined by the DBNAlliance, the regulatory framework is still in the early stages of adoption. However, the number of service providers and businesses becoming part of the network is increasing.

Under the current e-invoicing requirements, businesses that want to exchange e-invoices for B2B transactions must use XML-based Universal Business Language (UBL) format and include data such as invoice date, business name, and address, unique invoice number, payment terms, description of service supplied or goods sold, total amounts and prices, and reference to any additional cost, including insurance or shipping.

Recent Developments and Future Outlook of the US E-invoicing System

The DBNAlliance's goal is to establish a country-wide standardized e-invoicing system. This system will serve as the basis for implementing exchange systems for a broader range of electronic documents, further transforming the transaction system into a more digital one.

The next step in achieving this goal is to adopt and publish a regulatory framework. The adoption of a legal act regulating e-invoicing was announced for 2024 or 2025, so it is expected to be released in 2025.

If the US government decides to mandate and standardize e-invoicing, 15 currently used formats would be eliminated. This would simplify business communication, as all formats would use the same format and follow the same procedures.

Furthermore, mandating e-invoicing would help SMEs that are reluctant to implement these mechanisms in their business operations adopt them faster.

As more countries worldwide implement e-invoicing, the pressure on the US government to catch up and integrate its e-invoicing system with those of the EU and other countries is rising. To bridge the gap between the current status of the e-invoicing system and those established, the US government signed the Joint Declaration on enhancing e-invoicing interoperability between the United States and the EU (Declaration).

This Declaration aims to enhance cooperation between the US and EU and ensure business and technical interoperability in e-invoicing systems. Both parties recognize that the e-invoicing exchange network frameworks developed in the US and EU are designed differently but share similar technological standards, infrastructure, and business practices.

The US and the EU plan to hold expert meetings for discussion, which should ultimately lead to the establishment of interoperability, especially in terms of flexibility of data structure, payload alignment, and roaming establishment.

With all the work already done and the efforts of all relevant stakeholders, it is safe to say that e-invoicing in the US will be further regulated and developed and that more businesses will implement this mechanism in their operations.

Conclusion

From a government perspective, the benefits of implementing an e-invoicing system, whether for B2B, B2G, or B2C transactions, are apparent. Other countries' results show an increase in tax revenue and a reduction in tax evasion. However, implementing costs for businesses, especially SMEs, are an additional factor that must be accounted for when considering enforcing e-invoicing. 

Nevertheless, given the recent changes to the US sales and use tax, including the implementation of economic and marketplace nexus rules and regulations, it is clear that federal and state governments want to ensure that taxes are paid where they are due. Mandating e-invoicing is a proven solution and mechanism for ensuring tax compliance. Therefore, it seems logical for the US to continue its work in this field.

Source: US Bureau of the Fiscal Service, Office of Management and Budget, Business Payment Coalition, Joint Declaration - Enhancing eInvoicing interoperability between the United States and the EU, Council of State Taxation, The Federal Reserve, Digital Business Networks Alliance