Guide to Managing Sales Tax in Xero
Chapter 6: Xero and Avalara TrustFile
Some additional notes
Tax Rate auto-lookup is not available if you're creating a Credit Note directly. You would have to go to the invoice you're refunding and create the credit note there.
Using Avalara TrustFile once your data has synced
The dashboard in TrustFile shows the returns being populated in the current period. TrustFile assumes if you collect tax on a transaction in a given state, that you are registered in that state and populates a tax return for that state.
Setting up your filing calendar for each state
In the TrustFile Dashboard hover over a state box and the “pencil” edit icon will appear in the top right. Click on this to set up filing information for that state.
- Choose the form you will be (or have been) filing. Most states will have only one choice
- Choose the filing frequency. The frequency is dictated by the state and will be included in the registration information you received from them.
- Choose the tax type. Most states will have only one option, but for the states that give an option of some sort of use tax, you would choose that option if you are registered to collect the seller’s use tax in that state.
- The ‘Active From’ date is the date your registration became effective.
- The ‘Registration Number’ is the state-issued sales/use tax ID number that you received when you registered to collect the tax. It’s very important that this number is correct to avoid deficiency notices in the future.
- The FEIN is your US-issued Federal Employer Identification Number you received from the IRS. You can also enter this on the Company Settings page.
Why does Avalara TrustFile adjust my taxable sales?
For sales tax that you have already collected, TrustFile answers the question of which jurisdictions you owe, and sets you up for easy returns filing by determining how much of the collected tax is owed to each taxing authority. We assume that the tax collected is accurate, and that it’s what you will remit to the state. However, if you have over- or under-collected tax, TrustFile will make an adjustment to the gross sales amount so that it foots with the collected tax.
Does Avalara TrustFile work with manually created Xero’s Sales Tax Rates?
Xero users may use any tax lookup system they wish. As long as they are entered as Xero tax rates, the data will flow into TrustFile.
Does Avalara TrustFile work if you use an invoice line item to record Sales Tax?
Unfortunately, not at this time. This use case can occur with Xero Add-Ons that create sales invoices but only have the calculated sales tax amount and not the tax rate.
Why does the “Sales Tax Collected” in Avalara TrustFile not match my Sales Tax report in Xero?
TrustFile determines taxes by jurisdiction and breaks down liability on a per-state basis. This approach allows TrustFile to deliver more jurisdictional detail than is represented in the Xero report.
How do I update TrustFile after voiding an invoice that has already synced to Avalara TrustFile?
The easiest way to address this is to manually create a negative transaction in TrustFile, which cancels out the voided invoice amount. To do this, go to Orders, click Add Sales Tax Data, then choose Manually Enter Data.
Then, enter the refund amount as a manual transaction. In this example, we’ve voided invoice INV002, which was for $300 plus $15 sales tax.
Where can I file tax returns with Avalara TrustFile?
For Xero users, Avalara offers filing in all states that collect sales tax. Avalara must be notified of intention to file and all data must be finalized in Xero by the 10th of the month. Note that because TrustFile does not yet support local sales tax returns, additional work may be required in home-rule states (Alaska, Alabama, Arizona, Colorado, Illinois, and Louisiana).
How long does it take to get a signature ready TrustFile Return?
For Xero users, Avalara provides signature ready returns for all state level sales tax returns. Some returns are produced instantly, while others require a two-day lead time. The signature ready returns that require a lead time must be requested by the 15th of the month. You are responsible for printing or filing signature ready returns in a timely manner with the jurisdiction.
Does Avalara remit my taxes?
You are responsible for paying the tax amount due to the state, whether via EFT or by mailing a check.
What are other important things to remember when using the Xero Avalara TrustFile integration?
You should make sure you have a complete and accurate data set of transactions you are using or your returns. Note that you are responsible for ensuring that your data does not include duplicated transactions.
Before you finalize your data for TrustFile to file or after creating signature ready returns, you should review and make any required manual adjustments.