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Calculate 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. After approving the tax amounts, use the transaction data to file your taxes with Returns.

Even if you aren't filingHoverTT.png your taxes using Returns, this tool can help you assess your consumer use tax liability. Downloading a file of the consumer use tax calculated on your transactions can minimize audit risk by giving you better information about your liability.

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.

Calculate consumer use tax

Add or import transactions to calculate consumer use tax.

Review and download consumer use tax data

Once consumer use tax has been calculated, review or download the transactions at any time by viewing a report or downloading a transaction spreadsheet.

View your consumer use tax report

Once transactions are imported and the calculations approved, go to View Report under the Consumer use tax batch verification link to see a summary.

  1. To view a report of your consumer use tax calculations, go to the Admin Console and click the Tools tab.
    AvaTax-tool-imported file management.png
  2. Then click the Consumer use tax batch verification link, find the file, and click View Report.
    CUT view report.png
  3.  The report shows both overpaid and underpaid invoices. 
    CUT report summary.png

Download your consumer use transaction data

Use the following steps to download your consumer use transaction data from AvaTax.

  1. In the Admin Console, click the Tools tab.
  2. Then, under the Import section, click the View Imported File Status.

    AvaTax-View Imported File Status.png
  3. On the Import Status screen, you'll see two versions of your .csv file. The Verified file is a spreadsheet containing both your original transaction data and the consumer use tax data from the AvaTax calculations. (The other file is your original transaction import file).
  4. Click the Verified file to download the spreadsheet.

    Download verified transactions.png

 

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