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Set Up Avalara AvaTax Integration

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Overview

Avalara provides through its different product offerings, end-to-end sales tax compliance solutions. Their AvaTax tax engine provides the capability to automatically calculate tax based off of the most current tax rules and legislation. AvaTax is integrated into Accounting Seed. You can use AvaTax to estimate sales tax on Opportunities and calculate sales tax on Billings. After completing the required settings, the Tax Code field on the product will drive the correct tax calculation along with the Avalara Origin Address, Customer Billing Address, and/or Customer Shipping Address. 

Use this article to perform the following processes for setting up the Avalara AvaTax integration:

Best Practice: It is recommended that you establish a cutoff period before switching from one tax methodology to another. In addition, you should not switch tax methodologies in the middle of creating a Billing.

Set up Tax Settings in Accounting Settings

  1. Create an Avalara account at avalara.com.
  2. Click Accounting Home and under General Ledger Setup, click Accounting Settings.
  3. Click the Tax Settings tab, and then click Edit.

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    Note: Click here to view the above image in full screen. 

  4. Under the Available Tax Calculation Options, click the Avalara Sales Tax radio button.
  5. Under the Sales Tax Calculation Settings, select one of the following to determine the correct sales tax calculation method for your organization:
    Note: If you have questions, contact Avalara Support to determine the correct tax configuration to use for your company.
      1. Point of Sale is the physical location where a purchase of goods takes place. The origin and destination addresses are set to the Avalara Origin Address defined on this Tax Settings tab. Point of Sale is typically used in a retail environment.
      2. Point of Destination is the location where the buyer takes possession of the item sold. The origin and destination addresses are set to the Shipping Address on the Billing.
        Note: If the Sales Tax Calculation Mode in Accounting Settings is Point of Destination, then a complete and valid shipping address must be entered in order for the Avalara sales tax calculation to function as expected.
      3. Shipment is the location from where the item will be shipped. The origin address is set to the Avalara Origin Address defined on this Tax Settings tab and the destination address is set to the Shipping Address on the Billing.
        Note: If the Sales Tax Calculation Mode in Accounting Settings is Shipment, then a complete and valid shipping address must be entered in order for the Avalara sales tax calculation to function as expected.
  6. Under Avalara Credentials, locate and enter your Avalara Account ID, Avalara License Key, and Company Code by performing the following:
      1. Access the Avalara Account that was created in step 1.
      2. From the Settings drop-down list, select All AvaTax Settings.

        Avalara_03.png

        The Avalara Account ID and Company Code displays.

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      3. Copy and Paste the Avalara Account ID and Company Code into the appropriate fields on the Tax Settings tab in Accounting Settings.
      4. Return to the Avalara AvaTax screen, scroll down the page to License and API Keys, and click the link to generate the License Key.
        Note: The Account Administrator permission level is required in order to view and display the License and API Keys information on the screen below.

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      5. Click Generate License Key.

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      6. Copy and Paste the generated License Key into the Avalara License Key field in the Tax Settings tab in Accounting Settings.
    1. Under Avalara Endpoint, select the Sandbox or Production radio button.
      Note: Select Sandbox to test this feature until you are ready to deploy to your Production environment.
    2. Under Avalara Configuration, perform the following:
        1. Click the Lookup icon to search for and select an Avalara Sales Tax GL Account.
          Note: Typically, this is a liability account used to track the liability that you owe for taxes. If one has not been created, you will need to create a Sales Tax GL Account.
        2. Click the Lookup icon to search for and select the Avalara Tax Product.
          Note: This generic product record needs to be set up as an active product and included in your price book(s) before it can be searched for and selected from the Avalara Tax Product field.
          Note: The Product Name that you assign to this generic product will display on the Billing invoice.
    3. In the Avalara Origin Address field, enter your company’s address as it displays in Avalara.
    4. Click Save.
    5. Click Test Connection to test the settings to make certain that you have a connection with Avalara.
      Note: If you have a connection with Avalara, the “Success” message displays. Otherwise, the Test Connection fails, and you will need to review the entered information.
    6. Click Validate Address to validate the entered address.
      Note: Avalara requires valid address information to perform the tax calculations.
    7. Click Validate.

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    8. Click Replace with Validated Address. The validated address displays in all capital letters.

      Avalara_09.png

      This completes the Tax Settings for AvaTax.

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Assign an Avalara Tax Code to a Product in Accounting Seed

AvaTax’s calculations are centered around tax codes assigned to every product record. Users will need to update all existing products with its correct tax code. Note that any products that do not have a tax code are assigned a default tax code, which taxes that product at the tax jurisdiction’s tangible personal property tax rate, which is typically the highest.

  1. Click Accounting Home and under Orders & Inventory click Products.
  2. Select a list view (other than the Recently Viewed list view).
  3. Select a product and then, click Edit.
  4. Update the value for Tax Code.
      1. For a list of tax codes, go to taxcode.avatax.avalara.com.

        Avalara_10.png

      2. Search for and select the appropriate Tax Code.
        Note: If you have any issues with locating the correct Tax Code, contact Avalara Support.
      3. Copy and paste the Tax Code from Avalara into the Tax Code field on the Product record in Accounting Seed.

        Avalara_11.png

      4. Click Save.

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Configure the Account Record for Avalara

If you are using AvaTax, there are several configuration changes that should be made to the Account record page. Use the steps below to complete the changes.
  1. Edit the Account page layout.
    Note: For information about editing a page layout, refer to the Edit Page Layouts Manually article.
  2. Add the following fields to the Account page layout:
    • VAT Business Identification Number - This is an informational field that is used for VAT (Value-added Tax) customers when Avalara Tax calculation is enabled. The value that is entered here will populate the Customer VAT Number field on the Avalara transaction.
    • Exemption Number - If this field is populated, the Account will be considered as tax exempt by AvaTax. AvaTax does not verify the accuracy of the number that is entered in this field. 
    • Entity Use Code - This field should only be populated with a valid Entity Use Code that is available in AvaTax. AvaTax verifies the accuracy of the code that is entered in this field. If the code is not valid, the Account will not be tax exempt.
      Note: When setting up an Account as tax exempt, the Exemption Number and the Entity Use Code fields are mutually exclusive. Therefore, one or the other should be used.
  3. Add the Validate Address button to the Account page layout.
  4. Remove the Taxes related list, which is not applicable to AvaTax.
    Note: The Taxes related list is only applicable to Accounting Seed (AS) Native Sales Tax.
  5. Click Save.
  6. Return and refresh the Account record page. The added fields should display similar to the below sample screen.

    Avalara_12.png

    The Validate Address button should be available from the buttons drop-down list.

    Avalara_13.png

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Notes:  

  • When using AvaTax, any Product that does not map to a specific Tax Code is viewed as a taxable Product rather than a non-taxable Product. Non-taxable Products must be mapped to the correct Tax Code. AvaTax has a default Tax Code (P000000), which will be used to calculate taxes on Products that are not mapped to a specific Tax Code. Products with this default Tax Code will be taxed at the tangible personal property tax rate, which typically is the highest tax rate in a tax jurisdiction. 
  • The Tax Code field is used in the AvaTax integration as part of the API callout to Avalara for calculating the correct Tax Amount. 
  • When using AvaTax as your tax calculation method, the Tax Type and Tax Rate fields are not applicable.

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Release Notes and Schedule

  • If the Sales Tax Calculation Mode in Accounting Settings is Point of Destination or Shipment, then a complete and valid shipping address must be entered in order for the Avalara sales tax calculation to function as expected.

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Release Notes and Schedule

  • Header Level Posting (HLP) is available with the Iris release.

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