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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 Admin Console 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 aid you in understanding 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.

Examples

Example 1

You enter a purchase document with no tax override. In this case, AvaTax calculates the consumer use tax to be accrued. You can enter a negative cost amount when you want to credit a previously calculated or reported accrual. If you use Returns service, the calculated tax amount populates the tax amount on Returns.

  • AvaTax calculates tax.
  • The resulting tax updates both tax calculated and tax paid.
  • Tax variance calculated on consumer use reports is 0 (tax calculated minus tax paid).
  • Accrued tax reported on Returns equals the amount of tax calculated.

Example 2

You enter a purchase document with a tax amount override. In this case, you enter the vendor-paid tax as a tax override amount and it's compared to the tax amount calculated by AvaTax to determine if the correct amount of tax was paid. Never enter a negative cost amount because any tax differences related to these types of transactions need to be negotiated with the vendor.

There are three possible outcomes with this scenario:

Case 1

You paid the correct tax amount to the vendor. AvaTax performs as follows with no tax variance resulting:

  • Purchase amount is > 0.
  • The AvaTax service calculates tax and updates tax calculated.
  • Tax override amount updates tax paid.
  • Tax variance calculated on consumer use reports is 0 (tax calculated minus tax paid).
  • Accrued tax reported on Returns equals tax variance.
     

Purchase Amount

Tax Paid

Tax Calculated

Tax Variance

100.00

8.60

8.60

0.00

Case 2

You didn't pay enough tax to the vendor. The result is a positive tax variance that appears in the Tax Document Line Detail export report (found in the export reports under both Standard Sales Tax Reports and Standard Consumer Use Tax Reports) and the Consumer Use Tax Batch Verification tool (found on the Tool tab) in the Admin Console.

  • Purchase amount > 0.
  • AvaTax calculates tax and updates tax calculated.
  • Tax override amount updates tax paid.
  • Tax variance calculated on consumer use reports is greater than 0 (tax calculated minus tax paid).
  • Accrued tax reported on Returns equals tax variance.
     

Purchase Amount

Tax Paid

Tax Calculated

Tax Variance

100.00

6.50

8.60

2.10

Case 3

You paid too much tax to the vendor. The result is a negative tax variance and only appears in Admin Console reports. The negative tax amount doesn't flow to the tax returns (for Returns customers) because any refund or credit must be obtained from the vendor.

  • Purchase amount > 0.
  • AvaTax calculates tax and updates tax calculated.
  • Tax override amount updates tax paid.
  • Tax variance calculated on consumer use reports is less than 0 (tax calculated minus tax paid).
  • Accrued tax reported on Returns is adjusted to 0.
     

Purchase Amount

Tax Paid

Tax Calculated

Tax Variance

100.00

10.00

8.60

-1.40

Example 3

You enter a purchase document with an accrued tax amount override into AvaTax. In this case, the goal is to simply pass tax accrued outside AvaTax for inclusion in the Admin Console reports and/or tax returns (for Returns customers). The cost amount for documents of this type must be zero (0). Enter a negative tax override amount when you want to reduce a previously reported accrual.

  • Purchase amount = 0.
  • Accrued tax override amount is stored as tax calculated.
  • Tax paid is set to 0.
  • Tax variance calculated on consumer use reports is tax calculated minus tax paid, and equals the amount the user passed.
  • Accrued tax reported on Returns equals tax variance.

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 the Admin Console .

When using the AccruedTaxAmount override, the transaction/document amount must be $0, and the Tax Override Amount field should have the amount of consumer use tax to be claimed. If one line has AccruedTaxAmount for the Tax Override Type, all lines must have the same Tax Override Type selected.

  1. On the Transactions tab, select a Company in the upper right corner.
  2. Click New.
  3. On the Document tab, complete the required fields at a minimum (refer to add a transaction).
  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:
      • Line No
      • Quantity
      • Amount
        You may enter separate addresses for each line using the Origin and Destination hyperlinks, which open windows identical to those used for the origin and destination addresses of the document.
    3. If entering pre-calculated accrued tax or vendor-paid consumer use tax, select the appropriate Tax Override Type, and then enter the Tax Override Amount, Tax Override Date, and Tax Override Reason.
    4. Click Add.
  6. Click Calculate Tax in the left sidebar. The results of the tax calculation are displayed at the bottom of the Document tab.
  7. Each line added displays its tax information. Click the Expand  expand.png button for a line to view its tax information.
  8. Click the Collapse collapse.png button  for a line to return to the previous view. The tax displays in the last column.
  9. 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 the Admin Console at once. You can import consumer use transactions in Microsoft® Excel® or comma-separated value (CSV) file format. Once imported, manage the transactions in the Admin Console 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:

  • The AvaTax user has paid tax to the vendor, but wants to calculate the correct amount of tax.
    • ProcessCode 3: New transaction
    • ProcessCode 4: Adjust existing transaction
  • The AvaTax user provides just the taxable amount of a purchase or inventory transfer and wants AvaTax to calculate the tax amount to be accrued.
    • ProcessCode 3: New transaction
    • ProcessCode 4: Adjust existing transaction
  • The AvaTax user calculated and accrued the tax outside of AvaTax and simply wants to include this tax amount on their 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 1 or 2, input the tax override amount desired in the TotalTax column (column AP) and a non-zero cost amount in the Amount column (column N).
  • 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, which were added for this purpose. Using process codes 1 or 2 under these conditions will result in an error message requiring you to change the process code to 5 or 6.