Skip to main content
Avalara Help Center

Calculate Consumer Use Tax

AvaTax Update calculates consumer use tax on purchase invoices or purchase transactions. Some accounting software requires you to enable consumer use tax calculation in their configuration, but you don't have to do so in AvaTax Update. If you need a refresher, check out our short guide to consumer use tax , or watch our video describing the difference between sales tax, seller's use tax, and consumer use tax.

Add vendor-paid sales tax

To calculate consumer use tax, a purchase invoice needs to have a line item that defines the line amount as the vendor-charged tax. On the purchase invoice, if this line item isn't added, then the vendor-charged tax is 0. To add vendor-paid sales tax, do the following:

  1. Ensure that you enable consumer use tax calculation. 
  2. Create/Select a vendor bill and add item(s) as required.
  3. Add the Item that you have created for vendor paid tax and the tax amount in the Amount. If this line item isn't added, AvaTax Update for QuickBooks Desktop considers the vendor paid tax as 0. 

You can now calculate consumer use tax for this vendor bill.

Add location details for calculating consumer use tax

In QuickBooks Desktop, you can add the location address (i.e. address other than the company address) in a vendor bill and use it to calculate consumer use tax. To add the location details in a vendor bill, follow these steps:

  1. Ensure that you enable consumer use tax calculation. 
  2. Create/Select a vendor bill and add item(s) as required.
  3. Go to File > AvaTax > Location for Vendor Bill
  4. In the Location for Vendor Bill window, select a Location, and then click Ok. If you select the Add New option, add the detailed address before you click Ok.

You can now calculate consumer use tax for this vendor bill.

Verify vendor-calculated consumer use tax on invoices

In QuickBooks Desktop, calculate consumer use tax for vendor bills using one of the following methods:

  • Create a purchase order and then create a bill
  • Create a bill
  1. In QuickBooks Desktop, click Enter Bills.
  2. To create the bill, select Bill and create a new bill. To open an existing bill, type the Ref. No. of the purchase order.
  3. Enter the bill details.
  4. Consumer use tax is calculated when you save the bill. Click Save & Close to close the bill, or click Save & New to close this bill and create a new one.
  5. Messages are displayed based on the accrual amount suggested.
    • If the amount of tax the vendor charged matches what AvaTax Update calculated, the accrual amount is 0.
    • If the amount of tax the vendor charged is greater what AvaTax Update calculated, the vendor may have overcharged you tax.
    • If the amount of tax the vendor charged is less than what AvaTax Update calculated, the vendor may have undercharged you tax. You're given the option to self-assess use tax. If you select Yes, consumer use tax is calculated for the transaction and is posted to AvaTax Update and the associated GL accounts.
      QB_CUT_Undercharged.png
  • Was this article helpful?