Unbundled Fixed Price ($20) x Units x Applicable Sales Tax Rate

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We have a HW Product that includes HW, SW, Support/Maint, Activation and it retails for $100 as a bundle. ASC 606 says we need to break out the components and so we want to charge $20 (for the HW components) times the applicable sales rate. Can Avalara do this? we can't find a way. Must be a work around.
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Dylan Anderson

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Posted 5 months ago

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Katina, Official Rep

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Dylan,

The easiest way to tax the individual components separately would be send them in your transaction as separate line items, each with the appropriate amount ($20) and quantity. Then, the engine would look at each piece individually for the rate determination (though this could affect the logic in states with tax caps and thresholds, like FL and TN).

Alternatively, you can use a base override rule (possibly in conjunction with a custom tax code) to set the taxable base on those products to 20%. Then, we would only consider $20 of the $100 to be taxable and would calculate tax on that. However, this 20% would be fixed so if in some of your bundles hardware is only 15%, you'd have to account for that (perhaps with another custom taxcode with rules).

For information on base overrides, please see: https://help.avalara.com/000_Avalara_AvaTax/Add_or_Import_Custom_Tax_Rules?origin=deflection#Add_a_base_override_tax_rule

Please let us know if you have further questions.