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Avalara Help Center

How do we handle "advance" payments? For example, we are already booking rentals for next year, and we require 1/2 down at the time of booking. Is this payment for future rental taxable during the current quarter?

Overview

You would like to know when to report deposits or advance payments.

Environment

MyLodgeTax

Resolution

  • If you collect the tax you must pay it in the period in which you collected it.  If you don't collect tax on the deposit to reserve the rental, then you can wait to pay the tax until you collect the balance.  If your guest cancels the reservation and forfeits the deposit, you will need to report that revenue and pay the tax in the period in which they forfeit it. 

  • An argument for collecting and remitting tax on deposits is that if the tax rate changes, you'll either have to collect additional tax from your renters, or pay it out of your own pocket.  For example, let's say you collect rent in August for a January rental period and the tax rate increases effective January 1.  If you don't report the revenue until January, we will calculate the tax on the new rate, regardless of the tax rate you charged your renter.  If you report the revenue in August, we'll calculate the tax using the old rate.  With everything else you have to keep track of, it may just be easier to report the revenue as you collect it.