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Tax Calculation for Credit and Debit Memos

Zuora

Tax Calculation for Credit and Debit Memos

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The Invoice Settlement feature is generally available as of Zuora Billing Release 296 (March 2021). This feature includes Unapplied Payments, Credit and Debit Memo, and Invoice Item Settlement. If you want to have access to the feature, see Invoice Settlement Enablement and Checklist Guide for more information.

Zuora provides the ability to automate tax calculation for credit and debit memos under certain conditions. This article introduces the conditions, under which tax calculation for memos is either supported or unsupported. 

Tax Calculation When Creating Memos

The following tables show the supported (Yes) and unsupported (No) conditions of tax calculation when creating credit and debit memos.

Credit and debit memos that are generated from invoices:

Tax Engine Invoice in Tax Inclusive Mode Invoice in Tax Exclusive Mode
Zuora Tax

Memo tax is calculated based on the tax exclusive mode. There might be differences between invoice tax amount and memo tax amount because of the rounding.

Yes 

Note: Support the Percentage tax type only. We do not support the Flat Fee type.
Avalara Yes
Connect Yes

Credit and debit memos that are generated from product rate plan charges:

Tax Engine Invoice in Tax Inclusive Mode Invoice in Tax Exclusive Mode
Zuora Tax

Yes 

Note: Support the Percentage tax type only. We do not support the Flat Fee type.

Yes 

Note: Support the Percentage tax type only. We do not support the Flat Fee type.
Avalara Yes Yes
Connect Yes Yes

Credit memos that are generated from other ways, such as bill run or REST API:

Tax Engine Invoice in Tax Inclusive Mode Invoice in Tax Exclusive Mode
Zuora Tax

Yes

Note: Support the Percentage tax type only. We do not support the Flat Fee type.

Yes 

Note: Support the Percentage tax type only. We do not support the Flat Fee type.
Avalara Yes Yes
Connect
  • Bill Run: No
  • Other ways via REST API (Except generating memos from invoices and product rate plan charges): Yes
  • Bill Run: No
  • Other ways via REST API (Except generating memos from invoices and product rate plan charges): Yes

Taxation Items Creation Through REST APIs

You can create taxation items for credit and debit memos through REST "Create taxation items for credit memo" and "Create taxation items for debit memo" with the following conditions. The taxation items will be appended to the draft memos.

Scenario Invoice in Tax Inclusive Mode Invoice in Tax Exclusive Mode
Memos that are generated from invoices No

Yes

Note: If the invoice tax is calculated by the tax engines that are configured in Zuora, you are not allowed to append tax to the memo.)
Memos that are generated from product rate plan charges No

Yes
Memos that are generated from other ways, such as bill run No

Yes

Tax Recalculation When Updating Memos

When you update the amount of a memo item, the memo tax will be recalculated under the following conditions:

  • The memo is created from a product rate plan charge and you use Avalara to calculate the tax.
  • The memo is created from an invoice and you use Avalara or Zuora Tax to calculate the tax.

The memo tax recalculation will not be triggered due to memos cannot be updated under the following conditions:

  • The memo is created from an invoice and the invoice is in tax inclusive mode.
  • The memo is created from a product rate plan charge and the invoice is in tax inclusive mode.
  • The memo is created in other ways, such as bill run or REST API.