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Add or import tax-only credits

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This article applies to:AvaTax

In general, you should add credit and rebill transactions instead of using a tax credit—these credits should be a last resort, since they often cause discrepancies or inaccuracies on tax returns. Sometimes, however, you might not be able to edit the transactions you need to change—like if they're used in a tax return, for example. In this case, add or import a tax-only credit to your transactions in AvaTax.

Tip icon The basic formula for filing a tax return is taxable sales * tax rate = tax amount. Using tax credits can throw off this formula, since they reduce the tax amount, but not the taxable amount. As a result, your returns filed by Avalara might show unexpected amounts for gross, taxable, or nontaxable sales.

Before you begin

If you're importing these transactions, download the transaction import toolkit.

Steps

To manually add a credit memo:

  1. In AvaTax, go to Transactions > Transactions  and then select Add Transaction. 
  2. Fill out the basic transaction information.  If the credit should apply to the current term, use today’s date. 
  3. Select Save and Add Line Detail. 
  4. Select Add a Line Item and then enter a Quantity of 1 and a Total Amount of 0.
  5. Override the tax amount: 
    1. Select Additional Information and Tax Overrides, and under Advanced Tax Handling, choose Override the Tax Amount.
    2. Under Override Type, select Tax Amount.
    3. For Tax Amount, enter a negative number equal to the value of the credit, and then enter a reason for the override.
    4. Click Save Line Item.
  6. Select Calculate Tax to make sure all required fields are filled out.
  7. Select Save and then select Yes, Save as Committed.

To import a credit memo, follow the instructions for importing transactions, but pay special attention to the following columns:

  • ProcessCode (A) should be 1.
    This means that you're creating a new transaction with a tax override.
  • DocType (C) should be 5.
    This means that you're creating a Return Invoice transaction.
  • Amount (N) should be 0.
    This means that the line item return amount is $0.00.
  • TotalTax (AP) should have a negative value.
    This is the total tax amount that is being credited.