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Title: Calculating Sales & Use Tax on Invoices - Avalara

Brief description:

Companies working in multiple tax districts can experience challenges in maintaining a list of fluctuating tax percentages. The same district may sometimes tax different products in different ways.

Software that calculates sales tax, such as Avalara, can be helpful here. In the case of Avalara, a third party software, it assists in two ways. First, it calculates the tax based on the location and product. Second, it records the amounts by state and district. In addition to these features, you may elect to have the software file these taxes in some or all of your nexus jurisdictions.

This process outlined below can be used to assess and collect sales tax on Unanet invoices to customers.

What’s covered in this document:

Sample Table of Complexities when not using Sales & Use Tax software

When not using a software to calculate and manage Sales and Use Tax, companies may face challenges when managing on their own.  Attached is a sample table illustrating the complexities of various tax jurisdictions and the items they tax on.

Sample Company Sales Use Tax Matrix.xlsx

Initial Setup of Unanet and Avalara for Sales & Use Tax calculations

  • Purchase a sales tax calculation software such as Avalara.
    • You should work with your integration specialist at that company to setup the software. The item codes combined with the ship to address will ultimately serve as the basis for the calculation. If you sell multiple product types then you will want to set up different item codes. Tax exemptions may be based on different things according to the state statutes. You may need to setup different item codes for different states so they can be defined differently to ensure you are correctly collecting. The sample Unanet export template attached recognizes a unique item code for each location combined with the product type to allow maximum customization of your tax calculation software.
  • In Unanet, create a tax payable account for each state that you have jurisdiction in.      
  • In Unanet, in Admin > Setup > Additional Items, create Additional Item Types by state. For example, "Sales and Use Tax - TN", "Sales and Use Tax - CA", etc. Associate these items with the appropriate tax account.

  • Create an invoice (AR) Export template on your Unanet site. Here is a sample, the logic of which you should review upon import into Unanet: Avalara Sales and Use Tax Export Template.csv. Once downloaded (do not open the file), import into your Unanet system via Admin-Export-Import.
    • This template is built to be imported into Avalara software, but any sales and use calculation software should be able to provide an import template that can be used as a basis to customize the fields in an export from Unanet.
    • Edit the logic in the export template such that it will pull the appropriate codes and information which your tax calculation software requires. The logic in this particular sample template relies on the owning organization which uniquely identifies product types for this company. If you are combining different product types on invoices then you may prefer to use project or task types to determine the item code.

Invoice Creation

Create Draft invoices in Unanet using your standard procedures. The invoice should be reviewed for Sales tax requirements before completion of the invoice. Do not Complete the invoice before adding the Sales Tax via the steps below.

Run Export of Invoices

  • Go to Admin > Export. Click on the blue arrow to the left of the export titled "Avalara" or whatever name you have given your export template.
    • Important Note: You must have already created the Avalara Export template by importing the sample in the Initial Setup steps above, and editing it for the appropriate logic. (Contact Unanet Support or your Customer Success Manager for assistance here if you need it.)

  • Complete the search criteria that will export only your Draft invoices. Filling out the project code and invoice date fields on the export run criteria is recommended. Next, click Run Export.
  • Once you have downloaded the information into Excel, you will want to save it so you are able to upload it into Avalara. The file should be saved as a csv. 

Import file from Unanet into Avalara

  • Log into Avalara using your username and password.
  • Once logged in, select the menu option at the top of the page that says "Transactions," and then select "Import transactions."

  • Once in the Import transaction screen appears, you will be able to drag and drop your csv file or browse and select your file to import into Avalara. 

  • If you elect to browse, the next screen allows you to select the file that you will be uploading. Browse to the correct location and select the file. Once you confirm the correct file has been selected, click Upload or double click and Avalara will automatically calculate your sales and use taxes.

  • Once you click upload you will be immediately taken to a screen that shows you the Import Status. The status may initially show as "Waiting" and may need to be refreshed until it has a status of "Completed." If it says "Error," then the log should be reviewed to determine what field was rejected. When the import is "Completed" a file is created with any taxable liabilities. You will want to click on the "Result" file and save it to CSIFIN/Avalara/Result Files using the type and date of invoices as the title.

Add Tax amounts to Unanet Invoices

  • Now that you have determined that an item is taxable you will want to add the tax to the invoice in Unanet. This can be done through an upload using this process: FAQ - Is there a way to import additional items to existing Invoices? or manually. 
  • To enter the sales and use tax manually, go to Financials > Invoicing & Posting and select "List Invoices." Enter the necessary criteria to pull up your invoices. Select the first invoice that should be taxed. Click on the pencil to the left to edit the invoice. Select "Additional Items" and then enter "Sales & Use Tax" in the Description. Select the Additional Item Type that includes the state that the tax is being collected for. Next, enter the tax amount from the Avalara result download. Finally, click "Save."

  • Once saved, the invoice will include the sales tax. Select "Back to List."

  • You are now ready to complete your invoice. The import that you loaded into Avalara has already collected the information to be submitted to the state. The updates that you made to the invoice in Unanet are currently tracking the balance per state on the Balance Sheet.

Additional Information

KC - Is there a way to import additional items to existing Invoices?

Help Docs - Additional Item Types

Help Docs - Create Invoice

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