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Avalara Help Center

What is the difference between Document and Line level rounding?

Overview

A discussion of what happens when the default line-level rounding is changed to document-level rounding. 

Environment

AvaTax

Resolution

Rounding in AvaTax may produce different results depending on how your tax profile was set up at the time of the transaction. By default, the rounding level is set to Line.

Line-Level Rounding:

  • Round the tax amount to two decimal places for each tax line
  • Discard the rounding difference
  • Add the tax amounts of each line together to get the total tax amount
  • Occasionally calculate the sum of each line as a penny less or more than with document rounding

Document-Level Rounding:

  • Calculates the tax amount for each line (without rounding), adds those amounts, and then rounds the total to two decimal places
  • Eliminates the occasional rounding inequality experienced with the line-level method by redistributing the rounded amounts

 

Example

Three items (book, bookmark, reading light) with two taxing jurisdictions – one at 6.5% and the other 2.5%.

With line-level rounding, each line is rounded to two decimal places and then those results are totaled ($5.19)

  • The upside of leaving the default in place is that the component sum will always match the total tax, AND customers will end up paying a penny less when it is different
  • The downside of leaving the default in place is that cash register totals will disagree by a penny.

With document-level rounding, the lines are first added together and then that result is rounded ($5.20)

  • The upside is that total tax quoted will match cash register totals that the DOR publishes.
  • The downside is that the sum of the component taxes will sometimes be 1 penny less than the total tax for the document. 

The states are aware of the possible 1 penny difference in these scenarios and have certified Avalara to use either method of rounding. 

 

6.5%

2.5%

Line

Document

 $    40.80

2.652000

1.020000

3.67

3.6720

 $       1.98

0.128700

0.049500

0.18

0.1782

 $    14.99

0.974350

0.374750

1.34

1.3491

 

TOTAL Tax

Computed

$5.19

$5.20

AvaTax rounds by jurisdiction for that jurisdiction's tax rate, not by the combined tax rate.

  • If the address has multiple jurisdictions, the tax rate is rounded for each jurisdiction and then added together.
  • The tax rate is not combined for all jurisdictions and then rounded.

Note: In Florida, the standard engine rounding is not taken into consideration because the state has tax brackets based on the item amounts. Please reach out to the Florida Department of Revenue if you have more questions about their tax bracketing system.

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