Avalara

AvaTax is a cloud-based sales and use tax calculation system provided by Avalara. It fully integrates with Acctivate and provides robust sales tax calculations and compliance for companies of all sizes and volume.

Overview

Avalara is the leading provider for online sales tax calculations with over 100,000+ taxability rules for 11,000+ jurisdictions.

Sales Tax Options
Acctivate currently supports two options for sales tax calculation, remittance, and compliance.

  1. Embedded: Acctivate performs the sales tax computations based on the Tax Codes, Items and Groups from your financial accounting software (e.g., QuickBooks). Remittance is handled by the financial accounting software. Refer to the Sales Tax Configuration for more information on Acctivate's embedded tax calculation setup.
  2. AvaTax: Sales tax is calculated by the AvaTax web service and provided to Acctivate. The sales tax amount is included on the A/R invoice without details of the jurisdiction, tax rules, etc. Remittance to the tax agency is handled by the AvaTax Returns service.

AvaTax Components
There are three key Avalara services that are supported by Acctivate: AvaTax, Exemption Certificate Management, and Returns.

  • AvaTax
    Avalara AvaTax is the core service that provides the sales tax functionality for Acctivate users:

    • Address Validation with suggestions
    • Automatic jurisdiction selection at the "roof top" level
    • Taxability rules per Product Class
    • Tax overrides for specific Product ID's
    • Tax Holiday exceptions

  • Exemption Certificate Management
    Avalara Exemption Certificate Management is an add-on service that manages your customers' tax exemption certificates. Acctivate provides the Customer ID/Name and Certificate number from the Sales Quote, Order and/or Invoice. This service allows you to manage certificates directly in Avalara with the following advanced services:

    • Collect certificates online from customers
    • Verification of certificates
    • Digital storage and retrieval
    • View transaction history for certificates
    • Expiration and renewal notifications
    • AvaTax Returns

  • Avalara Returns
    Avalara Returns is the service that prepares and remits tax payments to each sales tax agency. This service is not part of the direct integration between Acctivate and Avalara. However, it's an important component of the overall AvaTax service. There are numerous benefits of the AvaTax Returns service:

    • Up-to-date jurisdictional information
    • Reduce employee time spent on returns
    • Single payment to cover all returns
    • Reduced penalties and interest by filing quickly
    • Retention compliance

Setup

The following instructions are used to configure your Avalara AvaTax account information in Acctivate.

Prerequisites
The following tasks must be performed before you set up the integration:

  1. If your Acctivate license does not include the AvaTax integration module, contact your Acctivate account representative to acquire the module.
  2. Sign up for the AvaTax service with Avalara. Be sure to let them know that you will be using the Acctivate integration.
  3. Locate your Avalara Account information (emailed by Avalara when your AvaTax account is created)
    • Account Number
    • License Key
    • Company Code
Note

When your AvaTax account is setup, you should receive an email containing the information required to complete the integration in Acctivate. If you do not have this information, you can Reset your License Key to receive a new one.

Keep in mind, this will break the connection to any other integration you might have until the new license key is put in place across all platforms. To reset your license key in the Avalara Console, go to Settings → License and API keys, then select Generate new key.

AvaTax Configuration

Once you've acquired the account information outlined in the Setup, you can perform the following configuration steps. Complete these steps before moving on to configuring customers or products.

  1. Configure QuickBooks

    • QuickBooks Desktop:

      1. In QuickBooks Desktop, go to Lists → Item List → Item → New.
      2. Create a new Sales Tax Item named Avatax, use any description. The tax rate should be 0.0% with the vendor set to Avalara, since the service will be handling tax calculations and payments.
      3. Create a second Sales Tax Item that is setup the same as above, however it should have the Sales Tax Name of Avatax Line.
      4. Synchronize Acctivate and QuickBooks.

    • QuickBooks Online:

      1. In QuickBooks Online, navigate to the Sales Tax Settings page.
      2. Click Add Rate to create a new Custom Sales Tax Rate. It should be a Single rate name AvaTax, set the Agency to any tax agency (you can use your local agency), and enter a Rate of 0%

The remaining steps are the same for QuickBooks Desktop and QuickBooks Online, unless otherwise noted.

  1. Fill in your AvaTax Account Information in Acctivate

    1. Enter your Avalara AvaTax account information in the Services → Avalara section of the Configuration Manager.
    2. Optionally, configure additional options:
      • Sandbox Account: This should only be enabled if you have a sandbox Avalara account that you are testing with.
      • Enabled Logging: When enabled, Acctivate will log Avalara requests and responses. Logs are saved to the Acctivate log directory.
      • Do not save invoices in AvaTax: When enabled, Acctivate will not submit invoices to Avalara as a committed transactions. It is not recommended for this option to be enabled.
    3. QuickBooks Desktop only: Set the Tax Line Item to the Avatax Line sales tax item made in the previous step.
      • QuickBooks Desktop will recalculate the tax once an invoice is synchronized from Acctivate. A tax discrepancy line item is used to account for the difference in the AvaTax calculated tax amount and the QuickBooks Desktop tax amount.

    In order to prevent QuickBooks from recalculating tax, the calculated tax amount will be added to the invoice as a line item, using the "Avatax Line" line item.

  2. Warehouse Address Information
    Avalara requires each warehouse in Acctivate to have a complete address. If you receive an error when saving an order related to an invalid or incomplete address, review the Warehouse settings in Configuration Manager and make sure that the address fields contain complete and valid information. According to Avalara, a taxable address must include one of the following combinations:

    • an address line, city, and region (state).
    • an address line and zip.
    • a region (state) and postal code.

    When an order or invoice line has a product that does not have a warehouse, such as a product that uses a labor, other charge, or shipping Item Type, Avalara uses the Branch address as the origin address. Ensure that each Branch in Acctivate has a complete address, following the rules that apply to the warehouse.

  3. Customer Entity Use Codes
    Entity use codes are used to identify reasons for exemption in AvaTax. The Avalara entity use codes can be assigned to Customer Types in Acctivate. You must fill in your AvaTax Account information before performing this step.

    1. Navigate to the Customer Types section of the Configuration Manager.
    2. In the Tax Exemption Code column, enter the corresponding entity use code.

    Once you've completed this step you can configure your customers.

  4. Address Validation
    Avalara provides an Address Validation service. Once you have configured Acctivate to utilize the AvaTax integration, you can enable Address Validation based on the customer's Ship To and Bill To Country.

    Open Configuration Manager, then browse to Customer → Customer Options section. In the Address Validation section, you can select which countries you would like to include or exclude in the address validation submission to Avalara.

    • To perform an address validation for all countries, enter an asterisk (*) in the Country field, then choose Avalara in the Method field.
    • To exclude the addresses of certain countries from being validated, enter the country code and leave the Method field blank.
    Note

    The Avalara Address Validation is valid for US and Canadian addresses only. Therefore it is recommended that you enter the formats of United States and Canada that you support (e.g., "US", "USA", "CA", "CAN", etc.)

  5. Review New Customer Defaults
    If you plan on using AvaTax for all your customers, you can set Customer Defaults so that new customers are properly configured.

    1. Navigate to the Customer Options section of the Configuration Manager.
    2. If applicable, set a default Customer Type.
    3. Set the Ship To Tax Category to Avatax.
    4. Set the Tax Code to Tax.

    These settings apply to new customers created. Any existing customers in Acctivate will need to be updated. Refer to the next section for more information.

Customer Setup

Once you have completed the initial setup of the Avalara AvaTax integration with Acctivate, you will need to configure your customers to allow their sales orders to be taxed via AvaTax.

  1. Assign the "Avatax" Sales Tax Category to your customer's Ship To addresses
    Sales orders with the Avatax Tax Category will use the Avatax service to calculate tax. To ensure that your customer's sales orders always default to the correct setting, set the Tax Category on your Customer's Ship To addresses to the "Avatax" tax category (be sure to use "Avatax" and not "Avatax line").

  2. Configure customer tax codes and assign Customer Types (Usage Codes)
    In the Edit Customer window, you can define a customer's taxability status as well as record their Tax Exemption number.

    1. In the Edit Customer window, click on the Tax Info tab.

    2. Set the customer's Tax Code:

      • Set the Tax Code to Tax if you ever plan on charging tax for this customer.
      • If the customer is tax exempt, then set the Tax Code to Non and enter the Tax Exemption number.
      Note

      Unless a Tax Exemption number and Usage Code (via the Customer Type) is provided, Avalara may override the customer's tax code.

      If a tax exemption number is provided, it's recommended that you assign the appropriate Customer Type (based on which Customer Type is associated with the entity use code that applies to the customer).

  3. Format customer addresses
    Avalara uses the sales order's Bill To address and Ship To address to determine the correct tax rate. This information is read from the sales order, but by ensuring that customers have the correct Bill To and Ship To addresses configured you can prevent incorrect tax calculations or failed tax calculations when entering or editing sales orders.

  4. Update any other integrations
    Once setup and tested in Acctivate, make sure to disable Avalara in QuickBooks. If it’s setup in both programs, the service will be called in Acctivate and again in QuickBooks.

    Any other integrations that send orders to Acctivate, such as an integrated web store, can keep an active AvaTax integration, however it should be configured to only process transactions as uncommitted or as sales orders (return orders, etc) which are treated as temporary transactions used to generate a tax estimate. A sales invoice created in Acctivate will be sent to Avalara as a committed transaction which finalizes the tax transaction.

Product Setup

Avalara's tax code mapping guidelines state "Items that aren't mapped to tax codes are taxed as if they are tangible personal property—at the standard rate for each jurisdiction."

In some cases, you may have items which require special tax treatment. Avalara makes it possible to map tax codes and rules to Acctivate product information within the Avalara console.

Acctivate sends the sales order line's Product Class ID as an Avalara Tax Code, and Product ID as an Avalara Item Code. This allows for various option for mapping Acctivate product information to Avalara for tax calculation purposes:

  1. Custom Tax Codes and rules: This is the most common method for mapping products to tax rules. A custom tax code is created for each Product Class, then the tax code is assigned to a tax rule.

    1. In the Avalara Console, navigate to Settings → All Settings.
    2. Next to Custom rules click Manage.
    3. On the Add custom tax codes tab click Add a custom tax code.
    4. Choose the appropriate Type.
    5. In the Code field, the the Acctivate Product Class ID.
    6. Enter a description of the tax code.
    7. Click Save custom tax code.

    Next, assign the custom tax code to a tax rule:

    1. In the Custom rules section, click the Add tax rate rules tab.
    2. Click Add a tax rule.
    3. Enter a tax rule name and fill out any other required fields.
    4. In the Tax Code field, enter the tax code you created (the Product Class ID).
    5. Click Save tax rule.

  2. Map individual items: This method allows for mapping a specific Acctivate product ID to a specific Avalara tax code.

    1. In the Avalara Console, navigate to Settings → What you sell.
    2. Click Add an item
    3. Enter the Acctivate Product ID as the Item code.
    4. Fill in any other required fields and click Next.
    5. In the Assign tax codes section, begin typing a description to locate and select the best tax code.
    6. Click Save and define attributes.
Tip

Since the Acctivate Product Class is sent as the Tax Code, the Product Class ID in Acctivate could be named to match an Avalara tax code. For example, a Product Class ID of "PH403826" would be interpreted by Avalara as the tax code "PH403826 (Oxygen tank - sold to medical facility)"

Note

If the Product Class doesn't match a standard or custom tax code, or if the Product ID isn't mapped to an item code, then Avalara will use a generic tax code "P0000000".

Data sent to AvaTax

The AvaTax calculate uses various data points to determine an accurate tax rate. Acctivate transmits header and detail level information to ensure that the most accurate tax rate can be calculated.

Header Information Transmitted

  • Doc Type: The Acctivate document type; i.e., Sales Order, Sales Invoice, Credit Memo, Credit Invoice. Sales Order and Credit Memo are treated by Avalara as a temporary status and are not saved.
  • Doc Code: Acctivate document number; i.e., the order number or invoice number.
  • Doc Date: Acctivate document date. I.e., sales order date, invoice date, etc.
  • Tax Date: The original invoice date for return orders/credit memos.
  • Doc Status:
    • Committed: Acctivate sales invoices and credit invoices are treated as committed transactions.
  • Customer: The customer from the document.
  • PO Number: The customer PO number from the sales document.
  • Currency Code: If multi-currency is enabled, the customers currency code is transmitted.
  • Exchange Rate: If multi-currency is enabled, the exchange rate between the customer's currency code and Acctivate's home currency.
  • Tax Exemption Number: The customer's tax exemption number, if one exists for the customer.
    • Entity use code: If a customer has a tax exemption number associated with them, the entity use code from their assigned Customer Type will also be transmitted.
  • Location Code: The Branch ID associated with the document.
  • Bill to and ship to address: Both the bill to and ship to addresses are sent.

Detail Information Transmitted

  • Line number: The Acctivate line number.
  • Item code: The Product ID is transmitted as the Avalara Item Code.
  • Item description: The product description from the sales document.
  • Quantity: The line quantity.
  • Amount: The line amount.
  • Tax Code: The Product Class ID assigned to the order/invoice line.
  • Warehouse Address: The address of the warehouse the product is being sold from.
    • Branch Address: If the product isn't being sold from a warehouse, e.g., it's a drop-ship, labor, shipping, or other charge item, the Branch address will be used instead.
  • Exempt Override Code: If the product is marked as Not for Resale in Acctivate then the product will be taxable and "Taxable" will be sent as the Exempt Override Code. Avalara defaults the Exempt Override Code to "Taxable"; it should not be changed in the Avalara admin console.

Usage

Once configured, AvaTax takes little user input in order to perform tax calculations.

Address Validation
If a sales order's ship to or bill to address includes a country that is configured to be validated, the Address will be validated by Avalara. If the address isn't recognized or is formatted incorrectly, Avalara will suggest a corrected version of the address.

Avalara prefers the 2-letter ISO (International Organization for Standardization) codes for countries. By using the 2-letter country code you will ensure that the address validation recommendations are accurate.

Sales Quotes and Orders
When using the Avalara integration, saving a new sales quote or order or saving edits to a sales quote/order will call the service to calculate the tax amount based on the origin, destination, date, exemption codes, and tax rules. The tax codes will update accordingly to be Tax or Non for each line based on these rules. This is based on the order detail's Product Class or Item Specific Rules which you can setup in the Avalara console. In the footer of the order, you'll see the newly calculated Tax Amount.

The AvaTax tax calculation for sales quotes, sales orders, and credit memos are treated as temporary transactions by Avalara and are used only to generate a tax estimate. Tax queries for sales quotes, sales orders, and credit memos are not saved by Avalara.

Sales Invoices
Once the sales invoice is created, invoice information will be transmitted from Acctivate to Avalara as a "committed transaction".

On the 10th of each month, Avalara locks the previous months committed transactions for customer's using the AvaTax Returns service. If you attempt to void an invoice in Acctivate that has been locked by Avalara, you will receive the message "The transaction has been locked by Avalara." If you need to correct an amount or make changes, you will need to use a credit memo instead.

QuickBooks
After synchronization with QuickBooks, the tax amount for the invoice in Acctivate will be moved to the AvaTax Line Item (see Setup an Avalara Tax Item) and the invoice tax rate will be toggled to 0%. Synchronizing the tax amount as a line item ensures QuickBooks does not attempt to recalculate the tax and that the invoice total matches in both programs.