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Why is my transaction not calculating the correct amount of tax?

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Overview

You have a transaction that is calculating tax but the amount calculated is incorrect.

Environment

Avalara AvaTax

Resolution

There are several reasons why the tax amount may be incorrect.

  • The tax rate in the jurisdiction may have changed.

  • The address on the invoice has only a State and Zip Code.  

    • Always include the address, city, state and zip code on a transaction. This ensures the precise tax rate is generated. 

  • You may not have established Nexus in the taxing jurisdiction

  • If you have Nexus in the jurisdiction you may not have the correct tax type selected.

    • If that is the case then we suggest contacting the applicable state to verify which tax type you should be collecting.

  • If there is a Tax Code in the transaction it may/may not be taxable in the applicable jurisdiction

  • If there is an Entity Use Code being used it may/may not be taxable in the applicable jurisdiction

  • If there is an Exemption Certificate being used it may/may not be taxable in the applicable jurisdiction

  • If you are using a Custom Tax Rule it may not have been applied correctly.

  • There may be a Jurisdiction Override in place for the specific address and/or zip code. Alternatively, it could be that a Jurisdiction Override needs to be created to compensate for a boundry that has just changed.