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Understand variance calculations in Avalara Consumer Use

Variance is the difference between the calculated consumer use tax in the tool and the amount of vendor paid tax reported for the transaction. Learn more about how Avalara Consumer Use calculates the variance amount.

Variance calculations

Calculation occurs during the initial transaction import and after any action in the user interface that potentially changes the line item taxability, and occurs in three steps:

  1. Recalculate the sales tax that the vendor should have paid based on the original line item (assuming that the vendor has nexus in the destination jurisdiction).
    • If the sales tax calculated is less than the vendor reported tax, the positive difference of these two values becomes the variance of a vendor overpayment
  2. If the vendor paid tax is less than the calculated sales tax from Step 1, calculate the consumer use tax that the buyer should owe on the line item.
    • This is necessary because consumer use tax can be less than sales tax
  3. If the consumer use tax calculated in Step 2 is greater than the vendor reported tax for the line item, variance is the reported amount minus the calculated amount.
    • This is the default value to be accrued as consumer use tax liability, if this line item is committed
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