AutoFile: Wholesale, exempt and untaxed transactions

TaxJar supports product taxability for these integrations so that you can enroll in AutoFile to file your sales tax returns accurately.

In this article, we discuss specifically how TaxJar and our AutoFile service supports your wholesale, exempt and untaxed transactions:

How does AutoFile support exempt and untaxed transactions?

Our Reports are based on the transaction information TaxJar's system receives from your cart.
If you don't collect sales tax on a transaction, our system will see that the sale is untaxed, and without further categorization, we're not able to see an explanation that tells us why a particular item was untaxed.
For this reason, AutoFile is based on the Expected Sales Tax Due Report in your account.

If you sell using these carts, we strongly recommend you categorize your exempt items inside of your TaxJar account so your TaxJar Reports will recognize your Product Tax Codes and exclude your exempt sales.

We show you how to do this here.
If you have a combination of unsupported carts connected to your TaxJar account, you will not be able to use the product taxability feature until we support exemption categorization for all carts you have linked to TaxJar
If you have an unsupported cart connected to your TaxJar account, you can still use our Actual Sales Tax Report to file your sales tax returns manually.
Options for other Linked Accounts are coming soon so please let us know if you'd like to be notified when your cart is fully supported.
Please note, this does not affect customer-exempt categorization as we discuss next!

What about my wholesale or sales to exempt customers?

No matter what cart you are using, if you sell wholesale items or make sales to exempt entities such as government or educational institutions, you can mark those as exempt in your Reports by designating those individual transactions in your TaxJar account as exempt.

See how to designate individual wholesale exempt transactions in TaxJar here.
If you're using the TaxJar API, you can classify your wholesale orders and items sold to tax-exempt organizations via the API.
You can also designate exempt transactions due to wholesale, resale, or exempt entities via CSV file upload.
Once you categorize your sales due to customer exemption, our Expected Report and therefore AutoFile will reflect these transactions as sales tax exempt.

When do I need to categorize my transactions in order to be supported by AutoFile?

You'll need to make sure your exemptions are applied while the Report is open and editable BEFORE your Report is locked for filing.

We have more information on this process and timeline here.

How does AutoFile handle untaxed transactions?

If you are not yet able to categorize your exempt products and if you enroll in AutoFile, we will view all of your transactions as taxable when we file your returns.

This means we'll report to the state that all of your sales during your entire filing period should be taxed, which will result in filing a payment that's closer to the estimate you see in the Expected Sales Tax Due Report, rather than the amount you see in your Actual Sales Tax Collected Report.
If you're currently selling (or plan to sell) a large amount of exempt or nontaxable items, this may calculate a much higher total of what's owed and you'll end up paying the uncollected taxes out of pocket on all transactions.
We're working on ways to better support exempt product categorization for more carts moving forward.

For now, if you have a large number of untaxed or tax-exempt items and are unable to designate them as tax-exempt in TaxJar, we suggest that you file a manual return rather than enrolling in AutoFile at this time.

Remember that all users can classify wholesale orders for AutoFile using the method here.

When can I make exemption or product categorization changes to my AutoFile return?

I want to make changes to product categorization and exemptions before my return is filed. How can I be sure those changes will be applied to my return?

Always check your AutoFile Dashboard to determine if the data in your Reports can be edited or updated.

You can safely mark individual wholesale transactions as exempt or categorize additional products as exempt from your Product Categorization & Exemptions page if the Filing Status is: Ready to Schedule or Filing Soon.
Changes to mark items as exempt or apply product categorization won't be reflected in your AutoFile return if the state's Filing Status is: Ready to File, In Progress, Submitted, Issue or Completed.
Items you mark as exempt or categorize as exempt when the state's Filing Status is Ready to File, In Progress, Submitted, Issue or Completed will be viewed as fully taxable when your return is AutoFiled and you will pay sales tax on those transactions.

How do I mark an item as wholesale/exempt while my state's Filing Status is Ready to Schedule or Filing Soon on my AutoFile Dashboard?

If you have transactions that are wholesale or entity exempt, you can mark them as exempt using the process outlined here.

How do I make changes to product categorization while my state's Filing Status is Ready to Schedule or Filing Soon on my AutoFile Dashboard?

If you sell product categories that are tax exempt or taxed at a reduced rate, you can classify those products here on your Product Categorization & Exemptions page to reduce the tax amount due in your Expected Sales Tax Due Report (which is the Report used to AutoFile your return.)
We have more detail about this feature here.

* If you see a status of "Issue" on your AutoFile Dashboard, please reach out to TaxJar Support for more detail regarding your return.

What does 'presumed exempt' mean?

If you didn't collect tax on a transaction at the time of the sale, our system will see that the sale is untaxed, but we're not able to see an explanation from your cart that tells us why the item was not taxed.

When we import an untaxed transaction from your cart, the actual sales tax collected report will assume the sale is exempt and you can see the total of untaxed, unclassified orders listed as "p resumed exempt" when you hover over the deductions/exemptions field in your actual state sales tax report.

You can get a closer view of the transactions we consider to be untaxed/presumed exempt if you click the blue 'view transactions' link under the gross total at the upper left hand of your TaxJar state report and filter the transactions by 'no sales tax was collected.'

Does the expected sales tax due report presume my untaxed sales are exempt?

No. The expected sales tax due report will still assume those presumed exempt sales should be taxed unless you have classified those items are exempt.

TaxJar users who sell on these supported platforms, or who use the TaxJar API (or a combination of supported carts and our API) may be able to classify exempt sales via the exemptions tab to make sure TaxJar's expected report will view those sales as exempt.
Once you classify your exempt sales, the expected report will no longer assume the sales you classified are fully taxable.
If you have sales from carts other than these carts or on a plan that does not support exemptions, you won't be able to use the exemptions tab.

What's the deadline for classifying exempt transactions for an AutoFile return?

Expected Sales Tax Due Report, which views all transactions as taxable.

If any of your untaxed sales were sold to wholesalers, exempt government entities or 'other' exempt entities (such as a charity), you can specifically classify those transactions as exempt using the method outlined in this post so the Expected Sales Tax Due Report will exclude those sales.
You can also classify your exemptions using the Exemptions page and we discuss this more in detail here.

When should I classify my exemptions?

Our system begins processing returns on 1st day of the month that your return is due. To ensure your exempt items will be marked as exempt, we recommend classifying all of your untaxed exempt items in your Report as early as possible to be ready when the system begins preparing your return and the report is locked for filing.

If the state is marked as Yellow (Scheduled) on your Dashboard, the report is currently unlocked and you will still be able to classify exempt transactions for the current return.
If you classify exempt transactions when the state is marked as Blue (In-Progress/Submitted) or Green (Completed) on your account's Dashboard, those changes will not be applied to the return. Instead, those items will be viewed as fully taxable when your return is AutoFiled and you will pay sales tax on those transactions.

If you do not yet see any of the above icons in the AutoFile tile on your Dashboard, you can still classify exempt transactions for the current month's return.

The image below shows a Dashboard tile for a Report that has not been locked for filing.

Any exempt items that are classified now will be viewed as exempt for the return filed that month.

If you see a YELLOW clock, the Report has not yet been locked for filing.

This means that you can still upload classify your exemptions between now and 7pm EST the day before the "Scheduled to be filed and paid by day" you see in that box.
In the example image below, any transactions that need to be reported as exempt when we file should be classified before 7pm EST on October 7, 2017.

What happens if I don't classify my exempt transactions before the report is locked for filing?

Any transactions that you classify after the Report is locked for filing will be viewed as fully taxable when we AutoFile.

If you see a BLUE clock, the Report has already been locked for filing and your return sent to the state. If you attempt to classify exempt items now, they will not be applied to the return. Any untaxed transactions at this stage will be reported to the state as fully taxable and you'll pay tax on those orders.

If you see a GREEN checkmark, the Report has already been locked for filing and your return has already been confirmed by the state. If you attempt to classify exempt items now, they will not be applied to the return. Any untaxed transactions at this stage were reported to the state as fully taxable.

Important note: If you'd like to edit data on your AutoFile returns due this month, you will need to pause your filing before your report locks (this date is detailed on your AutoFile Email Notification sent on the 1st of the month) in order to request TaxJar to make changes to your data. You should pause your return from your AutoFile Dashboard while you are waiting for a response to your Support request. We show you How to PAUSE a Filing here. It's imperative that you use the pause modal before your report locks if you're not ready for TaxJar to file your return.