When reconciling my liability worksheet, I noticed that the top-level line for a state shows sales and liability for that state, but when I expand the liability worksheet to see the specific return forms, it shows $0.00 for sales and liability.
We typically see this scenario when you have a mismatch between the tax type you are collecting, and the tax type reported on the return form you have set up as your filing calendar. I.E., you have calculated tax as sellers use tax but your active filing calendar can only be used to report sales tax.
Note: Avalara is not able to advise which tax type you should be collecting and remitting. Once you have determined which tax type is correct for your business, Avalara's support team can help you with configuring your nexus tax type and filing calendars to collect and remit accordingly.
Below, we’ll take a look at a specific example for Mississippi (although the same process will apply if you notice this issue for a different state):
In the screenshot above, you can see that the top-level line for the state shows $33.96 in Month Tax Liability Sales, but when the line is expanded the MS 72-010 form shows $0.00 for sales and liability.
To confirm why this is the case, we’ll need to check three things:
- The Tax Type setting for Mississippi on the Organization > Company Name > Nexus Jurisdictions
- The Tax Type(s) associated with the MS 72-010 filing calendar (in Tax Returns > Filing Calendars > Active Filing Calendars)
- The Tax Type(s) calculated on the Mississippi transactions for this month (using the Sales and Sellers Use Tax Summary report in Reports > Standard Sales Tax Reports > Tax Return Reports)
1.) Tax Type Setting:
We can see that the Tax Type is set to Sales or Sellers Use Tax. This means:
If the destination and origin addresses are both in Mississippi, the tax type will be sales tax
If the destination address is in MS but the origin address is not, the tax type will be sellers use tax
2.) Filing Calendar
Looking at the Tax Types section of the MS 72-010 filing calendar, we can see that it is only used to report sales tax. With the Sales or Sellers Use Tax nexus setting, this means that MS transactions with an origin address outside of MS will be calculated as sellers use tax, and will not be reported on the MS 72-010 form.
3.) Tax Type calculated on transactions
To confirm which tax type was calculated on your actual transactions, you can generate the Sales and Sellers Use Tax Summary report in Reports > Standard Sales Tax Reports > Tax Return Reports:
Looking at this report, we can see that only Sellers Use Tax was calculated, which is why it is not appearing on the MS 72-010 liability worksheet. MS has a separate form for reporting sellers use tax.
Resolving tax type discrepancies
To resolve this discrepancy, you will first need to confirm which tax type you should be collecting and remitting and then adjust your filing calendar(s) and/or nexus tax type accordingly. Avalara is not able to advise which tax type you should be collecting and remitting, but once you have determined which tax type is correct for your business we can help you with configuring your nexus tax type and filing calendars to collect and remit accordingly.