Calculating Sales Tax using AvaTax

Configuration Process Entering a sales order Shipping an order Tax filing FAQ & Diagnostic Tips Related Pages

Avalara's AvaTax automates sales tax calculations, reporting and filings. The process involves the calculation of sales taxes at the time of order entry and again at the time of order shipment, to update any rates which may have changed. Taxes are recorded in AvaTax automatically at the time of shipment based on the Ship-to address, provided there is a state nexus added in the AvaTax application and the order being shipped has a tax order line that is AvaTax-generated at time of order entry or via the Sales > Re-Price function. Users can then file taxes automatically by logging into the AvaTax application, verifying the information, and completing the necessary steps. 

In addition to ensuring greater accuracy when calculating sales taxes, companies will no longer have to maintain sales tax rate information in DEACOM since this is now be handled via the AvaTax application. The calculation of sales taxes via AvaTax is available when orders are entered and shipped in the main application, the DEACOM Point of Sale application, via EDI, and in the DEACOM eCommerce offering.

Additionally, different product categories (supplements, alcohol, food, general merchandise, etc.) may be taxed at different rates when using AvaTax by configuring the necessary Tax Exemption Groups. Once a Sales Order line is added for a taxable item, one line will be added to the order for the total sales tax amount based on the applicable rates. This is different from DEACOM's inherent tax lines that list State, County, etc. taxes separately. Keep in mind that when using AvaTax, the Accounting Reporting "Sales Tax" report will no longer serve a purpose. The AvaTax application will replace this functionality.

AvaTax functionality is only available in web based versions of DEACOM.

Configuration

Prior to using AvaTax with DEACOM, the following steps must be completed:

• Customers must create an account with AvaTax via https://admin.avalara.com
• Items will need to be set up with the "Saleable" flag checked on the "Properties" tab of the Item Master record in DEACOM.
• The following fields must be populated or checked on the APIs tab via System > Maintenance > API Profiles.
  • The "Tax API Type" field must be set to "AvaTax."
  • The "Tax Line Name" field must contain a valid name, such as "Sales Tax", which represents the name that will appear on order lines when taxes are added by AvaTax.
  • The "Tax API Username" and "Tax API Password" fields must be populated with the credentials supplied when the AvaTax account was created.
• Optional - The "Enable Client Side Logging for Tax APIs" flag in Sales > Options may be checked to see all data returned from the AvaTax API via the Integration Logging report in System > History/Performance.
• Optional - The "Tax Exemption Code" field may be used to indicate the code value to send for tax-exempt orders.
• The "Sales Tax Account" on the "Accounts Receivable" tab in Accounting Options must contain a valid liability account.
• Facilities and Ship-to records in DEACOM must contain valid addresses including a two-character country code and valid zip codes. The AvaTax application specifically requires a valid country(two-characters), state, and zip code on the Ship-to and Facility records used on the sales order. Users should always include a valid street address. Note: beginning in version 16.02.060, the AvaTax/Avalara integration will use the longitude and latitude values on the Ship-To record, if specified, instead of the Ship-To street address when calculating sales tax rates. One example where GPS coordinates may be used is for oil well sites that would not have traditional street address information.
• The appropriate Nexus entries must be setup in AvaTax in order to calculate sales taxes for shipments between states. Additional information on AvaTax and Nexus entries is available via https://www.avalara.com/us/en/learn/nexus.html. Once the appropriate Nexus entries are created, you may ship from any facility in one state to locations and customers in another provided the correct Nexus entries have been created.
• The following security settings, relating to tax, should be turned off for all users and user groups, to prevent confusion about what data is needed or useful.
  • Accounting – edit tax exemption group
  • Accounting – edit tax region
  • Accounting – sales tax
  • Bill-to Companies – edit sales tax
  • Sales orders – change tax region

Process

Entering a sales order

The process below details how sales tax lines and amounts are added to sales orders in DEACOM when utilizing the AvaTax integration. The steps are not meant to cover the full sales order entry process in DEACOM which is covered via the Entering Sales Orders page.

1. Navigate to Sales > Order Entry.
2. Select the appropriate Bill-to and Ship-to Companies. Note that the default Ship-to Company and numerous other header fields will be automatically populated after selecting a Bill-to Company, but can be overridden by the user, as long as the required security permissions are set to Yes.
3. Ensure the "Order Type" field is set to "Sales Order.
4. Enter any necessary sales order header information.
5. Click the "Add" button to add to display the "Edit Sales Order Line" form. This form is used to add items to the Sales Order.
6. At a minimum, the user must specify the "Part Number" and "Quantity" being ordered for each Sales Order line.
   • The remainder of the fields are either display only or optional.
   • Note: Pricing may automatically pull in based on the Sales Pricing Hierarchy.
7. If adding more lines to the Sales Order, the user can click the "Next" button to save the first line and bring up a blank second line. The Page Down key on the keyboard can be used as a shortcut to accomplish the same thing.
8. Once all the appropriate order lines have been entered, click the "Save" button on the "Edit Sales Order Line" form to save the last line added.
9. Click the "X" at the top of the screen to exit from entering Sales Order lines and return to the Sales Order header.
10. Enter any additional information as necessary. Note that if using MRP in DEACOM users will want to ensure the "Due to Ship" date is populated on the "Dates" tab. This date is used to determine in which MRP Bucket the demand for this item(s) on the Sales Order should be placed.
11. When finished, review the order and click the "Save" button. At this point, AvaTax will add one line to the order for the total sales tax amount based on the applicable rates. The rates are calculated as a result of analyzing where goods are being shipped from (determined by the address on the "Facility" used on the order) and where goods are being shipped to (based on the address from the "Ship-To Company" used on the order). The description of the line added to the order is based on the "Tax Line Name" field via Sales > Options. Once added to the order, the sales tax line cannot be modified but if needed, another line may be added to cancel out the sales tax.
12. If printing any desired documents, click the "Print" button.

Notes:

• Customers using AvaTax should not use Tax Regions in DEACOM, as the two are not compatible.
• If using AvaTax for sales tax calculations, the "Sales Tax" report via Accounting > Accounting Reporting will not contain entries relating to sales tax since this information will now be available in AvaTax.

Shipping an order

When orders containing AvaTax sales tax lines are shipped, AvaTax will check the information below, and if necessary, recalculate any appropriate tax amounts. Note that AvaTax sales tax lines are not displayed during order shipment.

• Changes to the Facility or Ship-To Company records.
• Order quantity changes.
• Tax rate changes. (Based on the rates stored and maintained via AvaTax)

No action is required by the user in order for tax rates to be verified, and if necessary, recalculated. Once the order information is verified, users can ship the order as normal. Information on shipping sales orders is available via the "Shipping Sales Orders" Best Practice page.

Tax filing

The auto filing of taxes is handled completely within the AvaTax application. Users will need to log on to their AvaTax account, verify the information, and complete the necessary steps.

FAQ & Diagnostic Tips

Does AvaTax calculate sales taxes for Canadian customers?

Yes, AvaTax supports the ability to handle Canadian sales tax.

Do I need to disable Tax Regions in DEACOM if I want to use AvaTax?

No. Tax Regions will be ignored when systems are set to use AvaTax.

Can AvaTax and DEACOM Tax Regions be used together?

No, the two are not compatible. Customers using AvaTax should not use Tax Regions in DEACOM.

TIP: Beginning in version 17.00.014 the AvaTax API was undated to better handle international orders in terms of country code checks. Now, when using Avalara if the country code (sh_country) on the Ship-To record is "US", "USA", or "CA", then the API will send the state code (sh_state). If it is not, then the API will not send the state code (sh_state) and therefore will not cause an issue where the API is looking for state names/codes on international orders.

TIP: Beginning in version 17.01.008, and when using the AvaTax integration, checking the Return Lots From Linked SO field in Sales > Options will result in the shipped date from the linked sales order being used as the "Tax Date" for the linked sales order when sending data to the AvaTax API. This date will be used to determine the refund amount.

Related Pages

• Processing Orders with Sales Tax