# Document types Source: https://developer.avalara.com/avatax-for-ap/ous3187316252332/ # Document types Learn about the different transaction types AvaTax supports, including their forms and purposes. AvaTax supports various transaction types, such as sales, purchases, returns (refunds or reverse transactions), and inventory transfers. Each transaction type is available in two forms: - **Invoice form**: A permanent transaction stored and reported to the tax authority. - **Order form**: A temporary estimate. These forms result in the following transaction types: Transaction type Lifetime Description `SalesInvoice` Permanent A finalized sale made to a customer `SalesOrder` Temporary A quote for a potential sale `PurchaseInvoice` Permanent A purchase made from a vendor `PurchaseOrder` Temporary A quote for identifying estimated tax to pay to a vendor `ReturnInvoice` Permanent A finalized refund given to a customer `ReturnOrder` Temporary A quote for a refund to a customer `InventoryTransferInvoice` Permanent A finalized shipment of inventory from one location to another `InventoryTransferOrder` Temporary An estimate for shipping inventory from one location to another AvaTax uses the `type` field to differentiate between these types of transactions. If you forget to include the type field in the [CreateTransaction API](https://developer.avalara.com/api-reference/avatax/rest/v2/methods/Transactions/CreateTransaction/), AvaTax will assume that you want a temporary estimate and will set a value of `SalesOrder`, which won’t be recorded in AvaTax. Many connectors will only ever work with sales transactions; but if you’re developing a plugin for an accounting system, expect to handle all different types of transactions. Let's discuss how each of these types is different. ## Orders vs. invoices Understand the differences between orders and invoices in AvaTax, including their purposes and how they’re used. Customers often need to [estimate tax for a transaction](https://developer.avalara.com/blog/2016/11/04/estimating-tax-with-rest-v2/) and record the actual tax for that transaction. AvaTax supports both scenarios: - Use AvaTax to predict taxes before taking action, such as showing "Estimated Tax" on a web storefront. - Use AvaTax to calculate taxes at the moment the transaction occurs, such as recording a sale in an accounting system. In AvaTax: - An **Order** represents a temporary transaction that isn’t saved. - An **Invoice** represents a permanent transaction that will be maintained. In AvaTax, an “Order” represents a temporary transaction that isn’t saved, whereas an “Invoice” represents a permanent transaction that will be maintained. Think about these documents like you’re a salesperson: - You begin by speaking to a customer and obtaining information about what they would like to purchase. With this information, you construct a [CreateTransaction](https://developer.avalara.com/api-reference/avatax/rest/v2/methods/Transactions/CreateTransaction/) request. - First, you calculate that transaction in AvaTax using a `SalesOrder` transaction type. This becomes a quote (or lead, or opportunity) that you can share with the customer. The quote is as accurate as the information that you have on hand, but you know that the customer will review the quote before making a decision to purchase, so we do not record it in our accounting ledger yet. - The customer then reviews the quote and may or may not request changes. It could be that the customer wants to purchase one more line item, or maybe they want the shipping address changed, or maybe they have an exemption certificate they want to provide to change their taxable use conditions. These changes can be recalculated by resubmitting the transaction to AvaTax, each time using the `SalesOrder` transaction type. - If the customer decides to cancel the order, or not to make a purchase, no action is required. You don't need to cancel a `SalesOrder` - because it hasn’t been recorded as a permanent transaction yet. - When the customer does choose to make a purchase, you can then recalculate the transaction in AvaTax using the `SalesInvoice` transaction type. The `SalesInvoice` transaction type represents a transaction that has occurred, and can then be recorded, queried, reported on, and eventually filed in a tax return to a tax authority. Because every type of transaction must be able to follow this same pattern, AvaTax supports all transaction types as both orders and invoices. Quotes and sales orders tend not to reflect actual sales and can often be abandoned (without a void or return processed). For this, we recommend using a document type of `SalesOrder`. Invoices usually represent an actual sale, so you can use a document type of `SalesInvoice`. Because the creation of an invoice doesn’t usually represent the finalization of that sale, keep the document in an uncommitted status. When the invoice is posted and the sale is recognized, the document should be committed by setting `commit=true` for the transaction or when adjusting a transaction. You can use committing only for invoice document types. Returns and credit memos work just like invoices, but they’re sent with negative amounts and some date considerations. If invoices or returns are voided, that cancellation needs to be communicated to AvaTax. It’s worth noting that the invoice transaction types provide a key compatibility between Avalara’s tax calculation API and the Avalara Managed Returns Service. The Managed Returns Service supports filing taxes calculated with AvaTax, but you can only file taxes that were recorded using invoice types. Anything you calculated using an order type is considered a temporary estimate and won’t be reported. Because order transaction types are temporary documents, it’s also worth noting that your transaction won’t be retrievable later. All order transactions will have ID numbers that are -1, indicating that they can't be fetched back using the API. Invoice transactions have positive ID numbers and can be retrieved back. Next, let’s describe the various types of transactions and see how they work. ## Sales transactions Understand the types of sales transactions and how they are recorded in AvaTax. A `SalesOrder` or `SalesInvoice` transaction represents a sale that your company made to a customer. This is by far the most common type of transaction that AvaTax handles. As discussed, a `SalesOrder` is an estimate and a `SalesInvoice` is a record of a transaction that occurred. Sales transactions are expected to be recorded as they occur. For example, if you calculate an estimate for a customer using a `SalesOrder` on the 11th of the month, then convert it to a `SalesInvoice` on the 20th of the month, choose the transaction date as the 20th. The AvaTax API supports this date behavior natively - just provide the date field on the [CreateTransaction API](https://developer.avalara.com/api-reference/avatax/rest/v2/methods/Transactions/CreateTransaction/), and AvaTax will record your transaction on that date. ## Return transactions Learn how to process return transactions, including refunds and tax adjustments. When a customer changes their mind and asks for a refund, you can process that refund by specifying a `ReturnOrder` or `ReturnInvoice` transaction, or you can call the [RefundTransaction API](https://developer.avalara.com/api-reference/avatax/rest/v2/methods/Transactions/RefundTransaction/). This transaction type refers to a reversal of the charges that occurred when you originally made the sale. As usual, the `ReturnOrder` can be used for estimating and the `ReturnInvoice` is a permanent record. Unlike sales transactions, return transactions have two dates. The first date indicates when the return occurred, and the second date is the date when the original purchase was made. Two dates are needed because the tax rate may have changed since the customer made the original purchase! Here’s how to refund the customer the exact amount they paid originally: - The `date` field of your `ReturnInvoice` is the date when the refund was issued. If you use Avalara's Managed Returns Service to file taxes, this `date` controls when the refund will be reported to the tax authority. - To specify the date when the original sale occurred, use a [TaxOverride](https://developer.avalara.com/api-reference/avatax/rest/v2/models/TaxOverrideModel/) object in the [CreateTransaction API](https://developer.avalara.com/api-reference/avatax/rest/v2/methods/Transactions/CreateTransaction/). Set the `type` of the tax override to `TaxDate`, and set the `taxDate` field to the date when the original purchase occurred. This will tell AvaTax to calculate the tax amount returned to the customer as of the tax override date. - If the customer's original purchase was recorded in AvaTax as a `SalesInvoice`, you can use the [RefundTransaction API](https://developer.avalara.com/api-reference/avatax/rest/v2/methods/Transactions/RefundTransaction/) to refund automatically the exact amount that the customer paid originally. This API takes care of all the hard work of setting up the tax overrides for you. ## Purchase transactions Learn about purchase transactions, including purchase orders and purchase invoices, and how they relate to tax compliance. A purchase transaction represents a purchase made by your company to a vendor. A `PurchaseOrder` represents a quote that you request from a vendor, and a `PurchaseInvoice` represents a finalized purchase transaction. In the United States, most vendors automatically charge and pay transaction taxes on your behalf. However, some companies choose to use AvaTax to identify any discrepancies between the tax rate you were charged by a vendor and the correct tax rate for a product or service. This calculation can assist a company in recovering overpaid taxes or in identifying any cases where their vendor relationships aren't in full compliance with tax laws. Use a `PurchaseOrder` to get an estimate of the tax that you’ll pay on a transaction, and use a `PurchaseInvoice` to record a transaction that occurred. When reporting a `PurchaseInvoice`, specify the tax amount that the vendor charged you, and have Avalara calculate the actual tax discrepancy. This allows you to correctly report Consumer Use Tax via Avalara’s Managed Returns Service. ## Inventory transfer transactions Understand how inventory transfers impact Consumer Use Tax for businesses with multiple locations. Inventory transfers provide another way of tracking transactions that have Consumer Use Tax implications. For companies with multiple warehouses and offices, shifting inventory from one location to another can have tax implications. As with the other document types, an `InventoryTransferOrder` represents an estimate, and an `InventoryTransferInvoice` represents a permanent transaction.