Avalara Helps Businesses Automate Consumer Use Tax Compliance

Consumer use tax is owed by a buyer when they’re not charged the full amount of sales tax on a purchase, or the item is used in another location or for a different purpose. If the usage or location of an exempt item changes, then the business likely triggers a use tax obligation. For example, when a business purchases an item and places the item in its inventory for resale, the business is not charged sales tax. However, if the business brings the item out of inventory and uses it for its own business, then the business becomes its own customer and is obligated to pay consumer use tax.

Due to the nuanced nature of events that can trigger a use tax obligation, finance professionals must manually self-assess liabilities for their businesses. The self-assessment process is resource-intensive and often prone to errors due to the complexity of tax rules and rates, which can leave businesses at risk of an audit.

Avalara Consumer Use offers businesses a solution that addresses every step of the consumer use tax self-assessment process, including user-defined rules, tax calculation, review, allocation, accrual, and documentation. This enables you to:

• Improve efficiency of consumer use tax self-assessment. Eliminate many manual processes by combining data from multiple systems into a single workflow, allowing users to create an automated or semi-automated self-assessment of general ledger expense and use tax liability.
• Reduce audit risk. Avalara Consumer Use identifies overpaid or underpaid taxes on vendor invoices and creates reports for tax liability by jurisdiction.
• Gain control over consumer use tax across the organization. With Avalara Consumer Use, businesses can import multiple transaction types, including purchase invoices, inventory usage, and fixed asset movements, to centralize the self-assessment process across the organization.

“The complex nature of consumer use tax combined with the burden of outside audits on businesses has created barriers that prevent many finance professionals from being able to manage consumer use tax on their own,” said Kevin Permenter, research manager at IDC. “Tools that automate aspects of the self-assessment process provide businesses with added efficiency in their reporting process and enable more accurate reporting of every decision tied to use tax actions across each invoice.”

“During times of economic uncertainty, savvy businesses often focus on internal efficiencies, like compliance and savings, to fuel growth on a shoestring budget,” said Sanjay Parthasarathy, chief product officer at Avalara. “Avalara Consumer Use is uniquely positioned to provide users with these benefits by providing a solid audit strategy that demonstrates a business’s best effort to be compliant. It does this while also maximizing tax savings for both over- and underpayment of purchases, as well as modernizing and automating the self-assessment process to accomplish more with less human effort and greater accuracy.”

Avalara Consumer Use integrates with Avalara AvaTax to automatically calculate consumer use tax based on the most current rules and rates. Businesses can easily integrate consumer use tax accruals into the filing process in Avalara Returns to automate sales and use tax return preparation.