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Avalara Help Center

Why is tax not applying to discounts and markups as expected?

Overview

You see that MarkUp and Discount items are reducing the taxable and nontaxable amount of sales in an unexpected way, discounting the taxable value of the sales more than expected.

Environment

Netsuite Basic

Resolution

  • Ensure you are using the newest Avalara bundle to access all features
  • Control tax codes, whether discounts apply to Gross or Net value, and taxability, in the AvaTax configuration:
    • Enable Discount Mechanism: Map discounts to an Avalara AvaTax tax code.

      • This is useful if you need to use nontaxable discounts, which do not affect the taxable amount of a line.

    • Discount Mapping: Have a discount apply to the gross or net amount when you use the Enable Discount mechanism.

    • Discount Tax Code: Enables selecting a tax code for discounts (in most cases, NT for non-taxable).

  • When using discount items in sales entered on the line level (with items) the discount applies to the line directly above it, so taxability will match that item, it decreases that line price only.

  • When using markup items in sales entered on the line level (with items) the markup applies to the line directly above it, so taxability will match that item, it increases that line price only.

  • A discount added above the line items in the Discount Item field applies equally to all items in the sale

    • There is only one field for this type of entry and markup items cannot be listed there