Add Consumer Use Tax

Here are a few terms to aid you in understanding how AvaTax Update 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 Update processes
tax calculated	The tax amount for a transaction as calculated by AvaTax Update
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 Update minus vendor tax paid

Example 1

You enter a purchase document with no tax override. In this case, AvaTax Update 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 Update 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
• If you import the purchase document with the import template, use process code 3 or 4

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 Update 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.

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

There are three possible outcomes with this scenario:

Case 1

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

• Purchase amount is > 0
• The AvaTax Update 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 Reports under both Sales Reports and Consumer Use Reports) in AvaTax Update.

• Purchase amount > 0
• AvaTax Update 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 AvaTax Update 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 Update 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 Update. In this case, the goal is to simply pass tax accrued outside AvaTax Update for inclusion in the AvaTax Update 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
• If you import the purchase document with the import template, use process code 5 or 6

Add consumer use transactions to AvaTax Update as purchase and inventory transfer invoices.

1. Go to Transactions > Transactions and click Add transaction
2. Set the Document type dropdown to Purchase Invoice or Inventory Transfer Invoice. Both of these invoice types calculate consumer use tax.
3. Enter the rest of the transaction details and line items just like you usually would when adding a transaction
4. Click Calculate tax to see the results of the tax calculation before saving the transaction
5. Click Save to save and commit the transaction, or Save as uncommitted if you want to be able to reference the tax calculation later but don't want it included in reports and returns

When you want to add a large number of consumer use transactions to AvaTax Update at the same time, import them. Indicate if each transaction is a purchase invoice or inventory transfer invoice in the DocType column, and use the ProcessCode column in the import template to handle different consumer use tax scenarios.

Scenario	Add a new transaction	Adjust an existing transaction
You've already paid tax to the vendor and want to report the amount of tax	ProcessCode 1	ProcessCode 2
You want AvaTax Update to calculate the amount of tax you need to pay on a purchase or inventory transfer	ProcessCode 3	ProcessCode 4
You've already calculated and accrued the tax outside of AvaTax Update, but want to include it on your returns and reports in AvaTax Update	ProcessCode 5	ProcessCode 6

Fill out the rest of the import template columns as usual when importing transactions.