A2X for PayPal allows the user to configure sales tax for each individual transaction row.

We highly recommend as a starting position that you allocate a "Not Taxable" tax code to all transaction rows within the Accounts & Taxes section of A2X for PayPal. From here, you can make customized changes where needed.

The allocation of tax settings within A2X for PayPal will be different depending on your business bookkeeping processes. We highly recommend you work with your accountant or bookkeeper to configure the taxes column of Accounts & Taxes. You can click here for a list of trusted A2X partners should you need further assistance.

As a general rule of thumb, you need to ask yourself the following question for each PayPal category:
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​1. Is the posting of this transaction recording a sale or expense in the connected accounting ledger?
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If the answer is yes, and your business has collected or paid sales tax on this transaction, then this tax code will need to be set up within PayPal.
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​2. Is the posting of this transaction receipting the deposit or payment associated with the sale or expense in the connected accounting ledger?

If the answer is yes, then the sales tax event has already been recorded, when the original sale or expense was recorded. Therefore the tax code will need to be set to Not taxable.

For most businesses that use accrual accounting, the sale or expense associated with the PayPal transaction row will be recorded before the PayPal transaction. This may be because your business uses our A2X for Shopify connection or another connected solution between the shopping channel that is responsible for recording the sales tax event.