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Avalara Help Center

Can Avalara handle cash basis accounting?

Overview

You report your sales based on the date the customer pays you rather than the date you invoiced them originally, and you want to know if Avalara can calculate tax with this accounting practice.

Environment

Avalara AvaTax

Resolution

  • Avalara AvaTax features do not support cash basis accounting, you can manually manipulate your transactions to move them forward for cash-basis accounting, but this is not recommended because it is only possible through manual updates and can create discrepancy in tax amount collected vs. charged the client:
    • Avalara calculates tax based on the tax date on the invoice, typically the same as the document date
    • Avalara reports tax based on the document date
    • Avalara is not updated when a payment is made, so we do not know if the invoice is paid or when that occurs
  • You have to manually change the date on your transactions and do this each month to move the transaction forward until it is finalized
    • Changing the date of a transaction moves it to a different tax period, which can change the tax rate and tax amount
      • You can do a manual tax date override of the transaction in the admin console.
      • For instructions on how to do this in your accounting software, please contact their support or refer to your accounting software user guide.
    • Changing transaction dates is a manual process, and is therefore error prone
  • Since this process is manual (not automated) it is completely managed by you the client