How to Issue a Tax-Only Adjustment to Correct Under- or Over-collected Sales Tax
Updated 13 days ago
Use this when you need to charge or return sales tax on its own, without recording a new merchandise sale.
Time required: About 10 minutes for the one-time setup, then about 2 minutes per adjustment You will need:
Permission to create products in your source platform (Chargebee, QuickBooks, Stripe, NetSuite, or similar)
Permission to edit transactions and classify products in Kintsugi
The exact tax amount you need to charge or return
A transaction that is not locked (transanction in a filing period that is not yet filed)
What a Tax-Only Adjustment is
Sometimes the sale was right but the tax was not. Maybe a rate changed, an address was wrong, or an exemption came in late. You do not want to rewrite the original sale, you only want to move the tax.
A tax-only adjustment is a document whose entire value is that tax difference:
A tax-only invoice collects tax you under-charged, which increases your liability
A tax-only refund or credit memo returns tax you over-charged, which decreases your liability
Kintsugi treats these as liability corrections instead of sales. They do not count toward your gross sales, taxable sales, transaction count, or nexus volume.
Start by Fixing the Original Invoice
If you can still correct the original invoice in your source platform, do that instead. Edit the invoice, fix the tax amount, and let it sync. That keeps your records clean and avoids an extra transaction entirely.
Tax-only adjustments are for when correcting the original is not possible, for example when payment has already been taken, when the billing period is closed on your side, or when the invoice cannot be reopened.
When You Would Use This
Situation | What you issue |
|---|---|
You under-charged tax and need to bill the difference | Tax-only invoice |
You over-charged tax and need to return it | Tax-only refund or credit memo |
A customer became exempt after you had already charged them tax | Tax-only refund or credit memo |
Kintsugi's tax engine returned an amount that did not match what was due on a tax-engine integration | Either, depending on direction |
You wrote off an unpaid invoice as bad debt and already remitted the tax on it | Tax-only refund or credit memo (see Bad Debt below) |
Set Up an Adjustment Product First
Whichever path you use, create one dedicated product in your source platform and reuse it for every adjustment. It makes each correction obvious at a glance, so you never have to work out whether an invoice is an adjustment or a real sale.
Field | Use this |
|---|---|
Name | Sales Tax Adjustment |
Description | Tax-only adjustment for under- or over-collected sales tax. Not a product or service sale. Do not charge sales tax on this line. |
Tax setting | Non-taxable or tax exempt |
Marking the product exempt at the source is not optional. If it stays taxable, tax gets calculated on top of your tax correction and the amount will be wrong.
When you issue an adjustment, put one line on the document using this product, set the amount to the tax difference only, and add no merchandise lines.
Choosing Your Path
Case 1: Transaction | Case 2: Product | Case 3: File upload | |
|---|---|---|---|
Use it when | One document needs correcting | Every transaction using a product is a tax correction | You bring data in by file rather than an integration |
Affects | That transaction only | All unlocked transactions using that product | The rows in your file |
Filing updates | Right away, within a few minutes | Automatically, usually 15 to 20 minutes | Depends on direction, see below |
Case 1: Mark a Single Transaction as Tax-only
This is the most common path, and the one to use when a document arrived looking like an ordinary sale.
Go to the Transactions page.
Find the transaction using the search box by typing the transaction ID.
On the matching transaction, click the kebab menu (three-dots) from the transactions row, select Mark as tax-only.
Click Confirm.
Confirm in the dialog. It tells you that Kintsugi will exclude the transaction from gross sales and adjust the tax liability for that filing period.
Kintsugi converts the transaction straight away. A sale becomes Tax collection, and a refund or credit note becomes Tax refund. The filing that contains it is sent for recalculation immediately, and the new liability appears within a few minutes.
To reverse it, select Remove tax-only and confirm.
The transaction goes back to counting as an ordinary sale or credit, and the filing liability adjusts back. The reversal is complete in both directions.
Case 2: Classify a Product as Tax Only
Use this when every transaction using a product is a tax correction, which is exactly what the Sales Tax Adjustment product is for.
Once the product syncs, classify the product as tax-only in Kintsugi.
Go to Products page.
b. On the search box, type & find the product you'll issue the tax-only adjustment.
c. On the matching product, select category as Misc, then subcategory as Tax Only, and Approve the categorization.
Tax Only is exempt by definition, so there is nothing else to configure. You only do this once per product.
Kintsugi then converts every unlocked transaction that uses that product. Sales become Tax collection, refunds and credit notes become Tax refund. This runs as a batch rather than instantly, so allow up to an hour for the transactions, then a further 15 to 20 minutes for the affected filings to recalculate.
Classifying a product reaches backward. Kintsugi converts transactions you have already imported, not only new ones, so the liability on any open filing that includes them will change. Only classify a product as tax-only if every transaction using it really is a tax correction.
Filings that are already approved or filed are not recalculated. A filing has to be unfiled or paused for its numbers to update.
Case 3: Adjustments When You Upload Files
If you bring transactions in through Data Sources and File Upload rather than a connected integration, the path depends on which direction you are correcting.
Returning over-collected tax. The upload template handles this directly. In your CSV, set transaction_type to TAX_REFUND on the adjustment row, use your Sales Tax Adjustment product in product_external_id, and put the tax amount in amount as a positive number. Kintsugi records it as a tax refund on import, with no marking step needed.
Collecting under-charged tax. Upload the adjustment as a normal SALE row using the Sales Tax Adjustment product, then convert it once it lands, using either Case 1 or Case 2.
A few upload rules that matter here:
amountcannot be negative. Direction comes from the transaction type, never from a minus signRows in a period that has already been filed are locked and cannot be changed by upload
Uploaded transactions stay in Kintsugi and are not written back to the platform your data came from
For the full column reference, see Uploading Sales Transactions via File Upload in Kintsugi.
Bad Debt
If a customer never paid an invoice and you wrote it off, you may have already remitted sales tax on a sale whose money you never received.
The mechanism is the same as any over-collection. Issue a tax-only refund or credit memo for the tax portion of the written-off invoice, then use Case 1, 2, or 3 to record it. Your liability for the current period drops by that amount.
Two things to be clear about. Kintsugi does not calculate bad debt relief or detect written-off invoices for you, so nothing happens until you issue the adjustment. And eligibility rules differ by state, covering who can claim, how soon, and whether the debt must already be written off for federal income tax purposes. Confirm your position with your tax advisor or reach out to us before you file.
How to Confirm the Tax-Only Adjustment Worked
On the transaction. The type reads Tax collection or Tax refund, and an indicator appears on the record showing it was marked tax-only.
On the filing. Gross sales, taxable sales, and the transaction count no longer include the document, and the tax liability has moved by the adjustment amount. The change is driven by the transaction's amount, so that is the figure to expect.
Here is what that looks like in practice, from a filing that started at $1,084:
Action | Filing liability |
|---|---|
Starting point | $1,084 |
Marked a tax-only invoice, collecting under-charged tax | $1,185 |
Marked a $5 credit note as tax-only, returning over-charged tax | $1,180 |
A liability increase is expected when you are collecting under-charged tax. The amount that used to sit in gross sales now sits in what you owe.
On the filing report. The adjustment also appears in the actual filing liability column, which is the figure used for remittance.
If the filing has not changed, check three things: whether you used Case 2, which takes longer; whether the filing is already approved or filed, in which case it will not recalculate; and whether the transaction was locked, in which case the option would not have appeared at all.
If gross sales moved but nothing else did, the document most likely contains a merchandise line. Review it at the source.
Things to Know
Tax-only marking works on unlocked transactions only. When a transaction is locked, the option is hidden rather than shown and disabled
A filing recalculates only when it is unfiled or paused. Approved and filed periods are left alone
Classifying a product as Tax Only is retroactive and changes the liability on open filings that include its transactions
Case 1 recalculates the filing in minutes. Case 2 runs as a batch and takes longer
Mixed documents are not supported. A document containing both merchandise and a tax correction stays an ordinary sale or credit note
The correction applies to the adjustment document's own filing period. Kintsugi never rewrites the original sale and never amends a period you have already filed
Kintsugi does not identify tax-only documents automatically. You mark the transaction, classify the product, or set the type on upload
Tax-only transactions are not linked to the original sale they correct. There is no lineage view or parent and child relationship
Amounts are entered as positive numbers. Direction comes from the document type
The feature is available to every organization. There is no plan tier or role requirement
FAQs
Q: Can I use a tax-only adjustment for bad debt?
A: Yes, for the tax you already remitted on an invoice that was never paid. Issue a tax-only refund or credit memo for the tax portion and record it using Case 1, 2, or 3. Kintsugi does not detect written-off invoices or calculate bad debt relief for you, and state eligibility rules vary, so confirm your position with your tax advisor first.
Q: I marked a transaction and the filing updated quickly, but the product route is taking much longer. Is that normal?
A: Yes. Marking a transaction sends its filing for recalculation immediately. Classifying a product converts its transactions in a batch first, then the filings recalculate, usually 15 to 20 minutes after that.
Q: My filing liability went up after I classified a product as Tax Only. Why?
A: That is expected when the affected transactions were sales you under-collected tax on. Their amounts move out of gross sales and into your liability. If the increase looks wrong, check whether the product is used by genuine sales rather than tax corrections.
Q: I do not see the Mark as tax-only option on a transaction.
A: The transaction is locked, which happens once its filing period has been filed. The option is hidden rather than greyed out. Reach out if data in a filed period needs to change.
Q: Can I undo this?
A: Yes. Select Remove tax-only and confirm. The amount returns to gross sales and the liability adjusts back. The reversal works the same way for tax collections and tax refunds.
Q: Can I use this to fix a period I already filed?
A: No. Tax-only adjustments apply to the period of the adjustment document, and filed periods are not recalculated. Contact our team about amendment options.
Q: Do I need one adjustment product per state or per customer?
A: No. One Sales Tax Adjustment product covers every jurisdiction and both directions.
Q: Will this change my nexus tracking?
A: No. Tax-only transactions are excluded from the sales volume and transaction counts that nexus monitoring uses, so a correction will not push you over a threshold.
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