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ACTION NEEDED: Unexpected under-collection of sales tax in Alabama, Louisiana, and Texas in January 2022

Overview

Between January 1 and January 19, 2022,  AvaTax did not collect tax for remote seller rates in Alabama, Louisiana, and Texas for transactions:

  • That originated outside of the United States
  • With a destination state of Alabama, Louisiana, or Texas
  • With a remote seller nexus setting

We’ve updated Avalara AvaTax rates effective January 19, 2022 to include the expected remote seller rates in Alabama, Louisiana, or Texas. However, we recommend following the steps outlined below to mitigate any potential risk for transactions calculated between January 1 and January 19, 2022.

Environment

AvaTax

Please take these mitigation steps:

Identify affected transactions

Review your sales and use transactions for the Texas, Alabama, and Louisiana from January 1, 2022 through January 19, 2022, to see which transactions did not calculate tax with the expected remote seller tax rate. This may have resulted in an unexpected under-collection of:

  • 1.75% in Texas
  • 8.00% in Alabama
  • 8.45% in Louisiana

To find affected transactions, review transactional data on the Transactions tab in AvaTax, or run a Tax Return - Sales and Sellers Use Tax Report.

Recalculate sales tax on the affected transactions

If you have affected transactions between January 1 and January 19, 2022, you may elect to rerun the transactions.

  1. In AvaTax, select the Transactions tab.
  2. Depending on the transactions you are looking for:
    • Select a date range by selecting dates in the From and To fields. 
    • Select filters to search by document status, document type, location code, and other criteria.
  3. Select the the transactions to recalculate, or select all filtered transactions by selecting the top check box. Note: Keep in mind that locked transactions can't be recalculated; any transactions included in filed returns must be credited and rebilled.
  4. Select Recalculate, then select Yes, Recalculate.
  5. When recalculation completes, select OK.

Note: If you choose not to recalculate tax due and report the tax charged and collected as is, you risk an unfavorable audit and additional tax assessment, plus potential penalties and interest in the future.

If needed, contact your tax professional for guidance on how to report the undercharged tax.