Tax Rounding on Invoices

Due to multiple calculations with a fraction of a cent rounded to the nearest cent (the unit of money depends on the currency), the total rounded and non-rounded amounts of inclusive taxes may slightly differ. The Tax Rounding Correction system setting makes adjustments to invoice taxes for any rounding errors that accumulate by tax charge category.

To enable tax rounding, set the Tax Rounding Correction system setting to True. Refer to Invoice System Settings for more information about this system setting.

Avalara Communications Tax and Tax Essentials tax processors also support tax rounding for both inclusive and exclusive taxation modes as defined by the Product Taxation Mode system setting (refer to Tax System Settings), which should be set prior to generating an invoice:

  • When set to INCLUSIVE, taxes are included in the product price.

  • When set to EXCLUSIVE, the tax charges, when rounded to five decimals, subtotaled by the tax charge category, and then rounded to two decimals, must equal the sum of the tax charges when rounded to two decimals and subtotaled by the tax charge category. If they do not balance, a tax adjustment is made for the appropriate tax charge category. Taxes are added on top of product prices.

    For example, if the total rounded tax amount for all invoice items is $17.44 and the non-rounded amount is $17.4339, the invoice tax amount is overstated by 0.01.

    To balance the tax total, when the rounded and non-rounded amounts differ, the system adds an additional invoice item of -0.01 using the same tax charge category as the invoice items and displays this cent as a new invoice item with the description of Tax Rounding.

You must set both the Tax Rounding Correction and Product Taxation Mode system settings to use either inclusive or exclusive taxation. Refer to System Settings for more information about these and other system settings. Also refer to the API 2.0 Help site link to an external web site for more information.

Refer to the following topics for more information about tax rounding:

 

 

 

Topic updated: 11/2023.