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Add or Import Consumer Use Tax

This article applies to:Avalara AvaTax

The consumer use taxHoverTT.png enhancement allows accrued tax amounts to automatically flow to the liability worksheetHoverTT.png and AvaTax reports. Below are definitions, examples, and use case studies to give you a better understanding before you calculate consumer use tax or add a consumer use tax transaction.

AvaTax provides support for common scenarios clients encounter with consumer use tax transactions. For example:

  • You provide just the taxable amount of a purchase or inventory transfer and want AvaTax to calculate the tax amount to be accrued.
  • You've calculated and accrued the tax outside of AvaTax and simply want to include this tax amount on your tax returns and/or in the various AvaTax consumer use reports.
  • You've paid tax to the vendor but want to calculate or verify the correct amount of tax so that:
    • You can include any underpayment on your tax returns.
    • You can claim any overpayment as a refund from the vendor.

AvaTax consumer use reports calculate a tax variance amount for consumer use transactions. This tax variance is defined as “Tax calculated by AvaTax minus tax provided by user.” The tax variance may be adjusted in Returns for certain cases, such as overpayments (as in the third scenario above). Overpayments can't be claimed on your sales and use tax return because it represents tax paid directly to the vendor. In this case, the accrued tax amount passed to Returns would be $0.

Definitions

Here are a few terms to help you understand how AvaTax handles consumer use tax.

Term

Definition

accrued tax

The amount of consumer use tax accrued for a period.

consumer use tax Transactional taxes paid by the buyer instead of the seller.

DocType

The type of document AvaTax processes. 

tax calculated

The tax amount for a transaction as calculated by AvaTax.

tax override amount

The tax override amount you entered on the transaction.

tax paid

The vendor tax paid for a transaction, entered as the tax override amount.

tax variance

Tax calculated by AvaTax minus vendor tax paid.

Consumer use tax scenarios

Scenario 1: No override, AvaTax calculates tax as normal

When you enter a purchase document with no tax override, AvaTax calculates consumer use tax accrued by the transaction. This includes both the tax amount for the transaction and the vendor tax paid, which should be equal to each other. If you use Returns, the calculated tax is automatically used on your returns.

To credit a previously calculated or reported accrual, enter a negative cost amount. If you import the purchase document, use process code 3 or 4.

Scenario 2: If you've already paid, override the tax amount

If you've already paid some consumer use tax, override the tax amount in the purchase document with the amount of tax you already paid. If you've underpaid, the difference between what you paid and what you needed to pay is reported as a tax variance in your reports and returns. Never enter a negative value as a tax amount override.

If you import the purchase document with the import template, use process code 1 or 2.

There are three possible outcomes with this scenario:

  • You paid the correct tax amount to the vendor. Tax is calculated and shows up in reports and returns as normal
  • You didn't pay enough tax to the vendor, resulting in a positive tax variance that appears in the Tax Document Line Detail export report in AvaTax and on your returns in Returns. Pay this remaining tax when you file your returns.
  • You paid too much tax to the vendor, resulting in a negative tax variance that appears in AvaTax reports, but not Returns. If you want a refund or credit of some kind, get it from the vendor that you overpaid.

Scenario 3: If you've already calculated, override the accrued tax amount

If you've already calculated the consumer use tax outside of AvaTax and just want it included in AvaTax reports and Returns, override the accrued tax amount when you add the transaction to AvaTax. The total line item cost on a transaction with an accrued tax amount override has to be zero.

To reduce a previously reported accrual, enter a negative tax override amount. If you import the purchase document with the import template, use process code 5 or 6.

Add a consumer use tax transaction

Enter and view consumer use taxHoverTT.png transactionsHoverTT.png, such as purchase invoices and inventory transfer invoices, on the Transactions tab in AvaTax.

To add a consumer use tax transaction:

  1. On the Transactions tab, from the Company list, select the company for which you're adding a transaction, and then click New. The New: Transaction Adjustment screen opens, displaying the Document tab.
  2. On the Document tab, complete the required fields at a minimum (refer to add a transaction).
  3. Ensure that the date in the Document Date field is within the current tax period.
  4. From the Document Type list, select Purchase Invoice or Inventory Transfer Invoice. These types of documents calculate consumer use tax.
  5. To add one or more lines (refer to add a transaction):
    1. On the Lines tab, click Add New Line for each Item in the document.
    2. At a minimum, complete the following fields for the new line:
      Field Value
      Line No The line number
      Quantity
      • If overriding consumer use tax, enter 1 
      • If not overriding consumer use tax, the quantity sold
      Amount
      • If overriding consumer use tax, enter 0
      • If not overriding consumer use tax, the dollar amount of the sale
    3. To enter separate addresses for the line, click Origin and Destination. Windows open that are identical to those used for the origin and destination addresses of the document.
    4. From the Tax Override Type list, select the appropriate tax override type based on one of the following scenarios, and then enter the Tax Override Amount, Tax Override Date, and Tax Override Reason:
      Scenario Override to select Notes
      To have AvaTax calculate accrued tax or vendor-paid consumer use tax Don’t select a tax override or enter the override information Make sure you’ve entered the dollar amount of the sale for the line item in Amount.
      To enter accrued tax or vendor-paid consumer use tax yourself in order to remit it to the state AccruedTaxAmount
      • Amount must be $0, and the Tax Override Amount field should have the amount of consumer use tax to be claimed.
      • You must select AccruedTaxAmount for all lines on the transaction.
      • The line calculates as if consumer use tax still needs to be paid and it populates on the liability worksheet to be filed.
      To enter accrued tax or vendor-paid consumer use tax yourself, but report it as already remitted to the state TaxAmount The line calculates as if the consumer use tax was paid and it doesn't populate on the liability worksheet.
    5. Click Add.
  6. Click Calculate Tax in the left sidebar. The results of the tax calculation display at the bottom of the Document tab.
  7. Click Save as Uncommitted or Save as Committed.   

Process codes to import consumer use transactions

Importing consumer use taxHoverTT.png transactionsHoverTT.png allows you to add many transactions to AvaTax at once. You can import consumer use transactions in Microsoft® Excel® or comma-separated value (CSV) file format. Once imported, manage the transactions in AvaTax the same way as any other transaction.

The ImportTransactionsTemplate files in the import transaction toolkit use the correct column headings. For help importing transactions, use the import transaction help file in the toolkit (ImportTransactionsHelp_Protected.xlsx) and follow the steps in Add or Import Transactions.

The specific ProcessCode and DocType values to use depend on the type of consumer use transaction imported. Use the DocType field to indicate the type of purchase document.

Use the ProcessCode field with purchase and inventory transfer document types to enter consumer use tax transactions as in the following 3 scenarios:

  • You've paid tax to the vendor and want to report the amount of tax
    • ProcessCode 1: New transaction
    • ProcessCode 2: Adjust existing transaction
  • You provide just the taxable amount of a purchase or inventory transfer and want AvaTax to calculate the tax amount to be accrued
    • ProcessCode 3: New transaction
    • ProcessCode 4: Adjust existing transaction
  • You calculated and accrued the tax outside of AvaTax and simply want to include this tax amount on your tax returns and/or in the various Admin Console reports
    • ProcessCode 5: Accrued tax override – new transaction
    • ProcessCode 6: Accrued tax override – adjust existing transaction

Additional Guidelines 

  • For process code 5 or 6, input the accrued tax override amount desired in the TotalTax column (column AP) and a zero cost amount in the Amount column (column N)
  • The AvaTax service no longer supports process codes 1 or 2 for transactions with a purchase or inventory document type and a cost (amount) value of $0. Use process codes 5 and 6 to add consumer use tax to the liability worksheet. Using process codes 1 or 2 under these conditions results in an error message requiring you to change the process code to 5 or 6.
  • Process codes 1 and 2 result in only the variance between the tax override amount and the calculated tax amount being reported
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