Define Billing Rules

Calculate taxes using information from Customer Account of:

You must have taxation enabled to use this rule. 

You can choose to calculate taxes based on the sold-to contact of the subscription owner or the invoice owner. All the account information of the specified contact, including tax information, such as tax exemption, is considered in the tax calculation. If you are using Avalara, value-added tax (VAT), company codes, and other Avalara tax information are also considered in the tax calculation.

You might choose to calculate taxes based on the account information of the invoice owner if the invoice owner is the reseller and the subscription owner is the end user.

By default, the subscription owner is used for calculating taxes.

Invoice/Credit Memo generation rule 

Select whether to split all negative charges to credit memo or to create credit memos only for net negative billing.

• Create credit memos for net negative invoice totals without grouping charges (default)
• Create credit memos for net negative invoice totals
• Put all negative charges on a credit memo
• Put all negative charges and zero credit charges on a credit memo

See Rules for Generating Invoices and Credit Memos for detailed information.

Create credit memos mirroring invoice items

Select whether and how to create credit memo items for discount invoice items or zero-balance invoice items.

The following options are provided:

• Yes
  You can create credit memo items of the Discount processing type, and can also create credit memo items for invoice items or taxation items with zero balance, covering the following scenarios:
  • The invoice items have no discount charges, and have been fully paid with payments or credit memos. The balance of both invoice items and their taxation items is zero.
  • The invoice items have discount charges without taxation items, and have been fully discounted or fully paid with payments or credit memos. The balance of the invoice items is zero.
  • The invoice items have discount charges with taxation items, and have been fully paid with payments or credit memos. The balance of the invoice items is zero, but the balance of taxation items and discount taxation items is not zero.
  Credit memo items of the Discount processing type are created for discount invoice items in both of the following operations:
  • Creating credit memos from invoices
  • Invoice write-off or reversal
• Yes but do not create for zero balance invoice items
  You can create credit memo items of the Discount processing type, but cannot create credit memo items for invoice items or taxation items with zero balance in the following scenarios:
  • The invoice items have no discount charges, and have been fully paid with payments or credit memos. The balance of both invoice items and their taxation items is zero.
  You can still create credit memo items for invoice items even if they have zero balance in the following scenarios:
  • The invoice items have discount charges without taxation items, and have been fully discounted or fully paid with payments or credit memos. The balance of the invoice items is zero.
  • The invoice items have discount charges with taxation items, and have been fully paid with payments or credit memos. The balance of the invoice items is zero, but the balance of taxation items and discount taxation items is not zero.
  Credit memo items of the Discount processing type are created for discount invoice items in both of the following operations:
  • Creating credit memos from invoices
  • Invoice write-off or reversal
• No
  You cannot create credit memo items of the Discount processing type, and cannot create credit memo items for invoice items or taxation items with zero balance in the following scenarios:
  • The invoice items have no discount charges, and have been fully paid with payments or credit memos. The balance of both invoice items and their taxation items is zero.
  • The invoice items have discount charges without taxation items, and have been fully discounted or fully paid by payments or credit memos. The balance of invoice items are zero.
  You can still create credit memo items for invoice items even if they have zero balance in the following scenario:
  • The invoice items have discount charges with taxation items, and have been fully paid with payments or credit memos. The balance of the invoice items is zero, but the balance of taxation items and discount taxation items is not zero.
  The behavior differs in the following operations:
  • Creating credit memos from invoices: Credit memo items of the Charge processing type are created for discount invoice items.
  • Invoice write-off or reversal: When the discount invoice item has a tax item, a credit memo item with zero amount from the discount invoice item is created, and its processing type is set to Charge. A credit memo taxation item is created and is attached to the zero amount credit memo item. See this case for an example.

By default, this billing rule is set to Yes. The default setting is recommended.

For the tenants that have the Invoice Settlement enabled starting from Zuora Billing Release 280, the default value of this billing rule is Yes. For the tenants that have the Invoice Settlement enabled before Zuora Billing Release 280, the current value of this billing rule remains unchanged.

To learn about the common use cases of invoice write-off or reversal, see Invoice write-off use cases and Invoice reversal use cases.

Available to credit validation for credit memos

Select whether and how to validate the "Available to Credit" amount of invoices when creating credit memos from the invoices.

The following options are provided:

• Header-level only
  Zuora validates the "Available to Credit" amount of invoices only at the header level when creating credit memos from the invoices.
• Header and Item-level
  Zuora validates the "Available to Credit" amount of invoices at both the header level and item level when creating credit memos from the invoices.
• None
  Zuora does not validate the "Available to Credit" amount of invoices when creating credit memos from the invoices.

By default, this billing rule is set to Header-level only. Zuora validates the "Available to Credit" amount of invoices only at the header level when creating credit memos from the invoices. 

This billing rule controls the credit validation during the creation of credit memos from invoices to ensure that your customers are not over-credited for the invoices. However, credit memos are always created by a bill run or billing API operations after subscriptions have been canceled or charges have been removed. For example, suppose a contract is $1,200 for the entire year starting on January 1st and the end customer is initially charged $1,200, but a $200 ad-hoc credit is issued against the charge. In that case, the prorated credit should only be $1,000. However, the bill run still generates a credit memo with an amount of $1,200.

See Understand Available to credit and invoice balance for more information.

Preserve snapshot of bill-to and sold-to contacts when billing documents are posted? 

Select whether to take snapshots for the bill-to contact and sold-to contact when the invoices are posted.

If you enable this billing rule, Zuora captures snapshots automatically when invoices are posted. The contact snapshots are available for queries using the SOAP API and Data Sources:

• SOAP API: The ContactSnapshot object
• Data sources: The BillToContactSnapshot and SoldToContactSnapshot joins on objects in the Invoice and Invoice Item data sources

When service period of an invoice item crosses multiple tax rate periods, it will generate:

Select whether to generate multiple taxation items when the service period of an invoice item spans multiple tax rate periods.

The following options are provided:

• One Tax Item (default)
• Multiple Tax Items

See Generation of Multiple Taxation Items for more information.

Zuora Tax rounding rule for inclusive tax calculation 

Select whether to round the net amount or the tax amount in the tax calculation.

The following options are provided:

• Rounding Net Amount (default)
• Rounding Tax Amount

See Rounding rule for inclusive tax mode for more information.

Enable Sequential Billing Document Number?

Use this billing rule to specify whether to enable the Sequential Billing Document Number feature, indicating whether and when Zuora assigns sequential numbers to billing documents, including invoices, credit memos, and debit memos. 

This billing rule is set to No by default, indicating that Zuora assigns sequential numbers to billing documents upon document generation.

With the Enable Sequential Billing Document Number feature enabled, you can use the Setting determine when the document will be assigned a number from the official document sequence billing rule to select when Zuora assigns a sequential number to a billing document.

If the Sequential Billing Document Number feature is enabled, the integration ID mapping between Zuora and Avalara becomes different. See Integration ID mapping between Zuora and Avalara for more information.

Setting determine when the document will be assigned a number from the official document sequence

Select when Zuora assigns a sequential number to a billing document. Billing documents include invoices, credit memos, and debit memos.

The following options are provided:

• Upon document generation (default)
  If this option is selected, a billing document has a unique formal number upon generation. For example, INV00000003.
• Upon document posting
  If this option is selected, a billing document in Draft status only has a temporary number, which consists of a prefix and a document number. For example, TMP-INV-00000004. The prefix is "TMP-INV-" for invoices, "TMP-CM-" for credit memos, and "TMP-DM-" for debit memos.
  Upon being posted, the temporary number of the billing document is changed to a formal number, for example, INV00000004. If you unpost a billing document in Posted status, the billing document number does not change back to a temporary number.
  If this option is selected, PDF file generation is automatically triggered when posting a billing document. Because the first version of the PDF file has a temporary number, a new version is generated upon posting to reflect the number change.

Invoice Past End-of-Term when Auto-Renew is OFF?

Select whether to invoice charges for an entire billing period when the end of the billing period is past the end of the subscription term, specifically when Auto Renew is set to No for corresponding subscriptions. 

This billing rule might be applicable when you have a subscription that includes a free trial period upfront (for one month) and the actual subscription charge begins in month two. In this example, an annual subscription fee would be charged at month two. However, at the end of the subscription term, the subscription would have a credit of one month.

If the subscription is not renewed by the customer's next bill cycle date following the term end, then there will be a credit given for the service period that was billed past End-of-Term.

By default, this billing rule is set to Yes: deprecated for all previously existing subscriptions. Zuora does not recommend that you use the Yes: deprecated option because it might cause incompatibility with ASC 606 revenue recognition.

Invoice Past End-of-Term when Auto-Renew is ON?

Select whether to invoice charges for an entire billing period when the end of the billing period is past the end of the subscription term, specifically when Auto Renew is set to Yes for corresponding subscriptions. 

This billing rule might be applicable when you have a subscription that includes a free trial period upfront (for one month) and the actual subscription charge begins in month two. In this example, an annual subscription fee would be charged at month two. However, at the end of the subscription term, the subscription would have a credit of one month.

If the subscription is renewed by the customer's next bill cycle date following the term end, then there will be a credit given for the service period that was billed past End-of-Term.

By default, this billing rule is set to Yes: deprecated. Zuora does not recommend that you use the Yes: deprecated option because it might cause incompatibility with ASC 606 revenue recognition.

If you want to set this billing rule to No, ensure that all the following billing rules are set to Yes:

• Prorate recurring charges for partial period?
• Bill recurring charges for partial month (with monthly based billing periods)?
• Bill recurring charges for partial week (with weekly based billing periods)?

Do not send $0 items to external tax engine for tax calculation

Select whether to send invoice items or memo items with zero amount to external tax engines for tax calculation. Memo items are available only if the Invoice Settlement feature in Limited Availability enabled. 

By default, this billing rule is set to No, indicating that Zuora sends invoice items or memo items with zero amount to external tax engines for tax calculation.

This billing rule is only available if you use integration with third-party tax engines for tax calculation. It helps reduce the taxation service cost when many usage charges exist and many invoice items or memo items have zero amount on recurring base.

Redistribute Zuora Tax rounding differences

Select whether to redistribute the tax rounding differences between the group level and item level when you use Zuora Tax for tax calculation. 

The following options are provided:

• Yes 
  Invoice items in one invoice are grouped based on the same tax code, tax name, and tax rate, and the total tax amount is calculated at the group level and the item level. The tax rounding differences between the group level and item level are redistributed to the corresponding items.
• No (default) 
  Zuora does not redistribute the tax rounding differences between the group level and item level.

See Redistribute Zuora Tax rounding differences for more information.

Apply new tax rate for additional units purchased and old tax rate for returns?

Select whether to apply the new tax rate for the additional units that are purchased and the old tax rate for returns in scenarios where tax rates are changed in billed periods, changes are made to active subscriptions, or the taxability is changed to product rate plan charges.

The following options are provided:

• Yes
  The new tax rate is applied only for the additional units that are purchased, and the old tax rate is applied for returns.
• No (default)
  The new tax rate is applied for all the units that are purchased, and the old tax rate is applied for proration credit.

See Tax Selection for Calculation for more information.

Use Avalara to calculate taxes for invoice item adjustments?

Select whether to use Zuora's Direct Avalara Integration to create tax invoice item adjustments corresponding to charge invoice item adjustments.

By default, this billing rule is set to No indicating this feature is disabled. After you enable this feature, tax values are calculated by Avalara synchronously when you create charge invoice item adjustments.

See Avalara taxes in invoice item adjustments for more information.

Format numeric merge fields based on communication profile locales?

Select whether to format numeric merge fields based on the communication profile locales of your customers when defining templates for invoices, credit memos, and debit memos.

The following options are provided:

• No (default).
  If you have not set a format pattern for merge fields in the templates, Zuora will format the numbers with a system default behavior; if you have set the format pattern, Zuora will format the numbers with the specific pattern.

• Yes
  This option is available only if you have set a format pattern for merge fields in the templates. As to the locale to be used, it depends on the customer account setting. If the customer account has a communication profile, its locale will be used; otherwise, the tenant locale will be used. 

See Define date and numeric formats for mail merge fields for more information.

Allow indistinct mapping from Memo/Invoice Item Adjustment tax item to invoice item tax

Select whether to allow Zuora to indistinctly map memo/invoice item adjustment (IIA) taxation items to taxation items on the corresponding invoice. 

The following options are provided:

• No (default)
  Zuora uses distinct mapping. 

• Yes
  Zuora tries distinct mapping first but will use indistinct mapping when distinct mapping is insufficient, ensuring that each taxation item on a Memo/IIA can be associated with a taxation item on the corresponding invoice.

See Mapping from Memo or Invoice Item Adjustment tax items to invoice tax items for more information.

Allow invoice splitting?

Select whether to use the invoice splitting feature.

The following options are provided:

• No (default)
• Yes
  You can split an invoice into multiple ones with different payment schedules on a percentage basis. You can input decimal percentages for each entry.

See Splitting invoices for more information.

Allow to consolidate subscriptions, order line items and standalone invoice items into a single invoice?

Select whether to consolidate subscriptions, order line items, and standalone invoice items under the same account into a single invoice. 

• Yes (default)
  Zuora consolidates subscriptions, order line items, and standalone invoice items under the same account into a single invoice in the following approaches:

  • Through bill runs
  • Calling the Generate billing documents by account ID operation
  • Calling the Invoice and collect operation
  • Calling the Generate action (not recommended)
• No
  Zuora separates subscriptions, order line items, and standalone invoice items under the same account into different invoices based on their origins.

Credit for Prorated Discounts (Fixed-amount Discount Charge Only)

Select whether to prorate the discount when issuing credits back to your customers when they shorten or cancel a regular charge in their subscriptions and the regular charge has a fixed-amount discount charge applied to it.  

• Yes
  Prorate the discount your customer can have.

• No (Default)
  Do not prorate the discount and let your customer have the original discount as much as possible.

See Credit for prorated discounts for more information. 

Use system default suffix for credit items

Select whether to append credit-related suffixes to the line item name of each charge that is credited back in invoices.

• Yes (Default)
  Zuora automatically appends credit-related suffixes to the line item name of each charge that is credited back, for example, credit items generated because of subscription cancellation, early termination, and price changes.
  • If a charge is partially credited back, the charge line item name ends with Proration Credit.
  • If a charge is fully credited back, the charge line item name ends with Credit.
• No 
  Zuora does not append credit-related suffixes to the line item name of each charge that is credited back.
  • If a charge is partially credited back, the charge line item name ends with Proration.
  • If a charge is fully credited back, the charge line item name does not have any suffix.

Enable Customer Hierarchy?

Select whether to enable the Customer Hierarchy feature.

The following options are provided:

• No (default)
• Yes
  You can select a parent record in a customer account.

For more information about this feature, see Customer Hierarchy.

Enable catch-up bill run?

Select whether to enable the Catch-Up Bill Run feature.

The following options are provided:

• No (default)
• Yes
  You can create catch-up bill runs to migrate customer data or subscription information from other systems into Zuora.

For more information about this feature, see Catch-Up Bill Run.

Default bill run to automatically renew auto-renew subscriptions that are up for renewal?

Select whether to enable bill runs to automatically renew auto-renewable subscriptions that are up for renewal.

The following options are provided:

• Yes (default)
  With this option, the Automatically renew auto-renew subscriptions that are up for renewal check box is selected by default in the Processing Rules section on the Create Bill Run page and Create Scheduled Bill Run pages. Auto-renewable subscriptions that are up for renewal are automatically renewed during bill run creation.
• No
  With this option, the Automatically renew auto-renew subscriptions that are up for renewal check box is unselected by default in the Processing Rules section on the Create Bill Run page and Create Scheduled Bill Run pages. Auto-renew subscriptions that are up for renewal are not automatically renewed during bill run creation.

When bill credit for recurring charges, based on billed period or credit period?

Select whether to bill credit for recurring charges based on billed period.

The following options are provided:

• From effective end date to end of the current billing period
  If this option is selected, the credit amount is calculated by considering the remaining time in the current billing period.

• Based on the total billing period amount and charged amount (default for new tenants)
  If this option is selected, the credit amount is calculated by considering the total billing period and the charged amount during the period. This approach ensures that the calculated credit amount is more accurate and consistent with the invoice amount, minimizing rounding discrepancies.

 See Probation credit for more information.