AvaTax supports common scenarios for calculating consumer use tax on a transaction:
- You want AvaTax to calculate the tax to be accrued on a purchase or inventory transfer.
- You calculated and accrued the tax outside of AvaTax and want to include it on your tax returns or in AvaTax consumer use reports.
- You paid tax to the vendor but want to verify your tax calculations so you can include underpayment on your tax returns or claim overpayment as a refund from the vendor.
This article summarizes what you should do in each of these cases. See this guide for help adding or importing consumer use tax transactions.
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 Managed 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 Managed 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 on AvaTax reports (but not in Managed Returns). To get a refund or credit, contact the vendor you overpaid.
AvaTax consumer use reports calculate a tax variance—the tax AvaTax calculates minus the tax you provide it—for consumer use transactions. This figure may be adjusted in Managed Returns in cases like overpayments, which can't be claimed on your returns because they represent tax paid directly to the vendor.
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 Managed 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.