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Tax Automation with Avalara

1min



Introduction

Avalara is tax automation for businesses with real-time tax calculation and automatic returns filing.



Suppose you want to sell something in Augusta, Georgia. Do you have a local sales tax or not? 

Classifying a sale in Avalara and inputting the proper address of where you're selling your item automatically states the correct tax rate.





Prerequisites:

Make sure that you have created your account in Avalara.



In the OMS, navigate to Settings --> Store.

In the Environment Variables, scroll down and the following:



Variables

Values

Notes

AVATAX_ACCOUNT

<your Avalara Account number>

Located under Settings in your Avalara Account

AVATAX_COMPANY_CODE

DEFAULT



AVATAX_LICENSE_KEY

<Your Avalara Licence key>

Your license key is emailed to you by Avalara when you set up your account.

AVATAX_LOG_ENABLED

true



AVATAX_ORIGIN

{ "line1": "123 Lafayette Street", "line2": "city": "New York," "region": "NY," "postalCode": "10013", "country": "US" }

Make sure that your HQ address is formatted as follows - 123 Lafayette being an example here

AVATAX_TAX_CALCULATION_ENABLED

true



AVATAX

enabled





Navigate to Taxes



Settings - Taxes
Settings - Taxes




Click on Tax Categories tab and click New Tax Category



Tax categories are used to group tax rates together—all products and shipping methods are assigned a tax category





New Tax Category
New Tax Category






Please refer to this list of Tax Codes from Avalara to ensure that your codes are accurate.



Provide a Name and the Tax Code

Default checkbox: when checked this tax category will be selected by default when creating new products or variants

If you're primarily selling one category of good/service, select the checkbox.

The rules for collecting sales tax on shipping charges can be complex for each state; therefore, Avalara's whitepaper offers guidance on what to watch out for when it comes to sales tax and shipping.



Click on Tax Rate tab and click on New Tax Rate



Tax rates associate a tax category with a geographic zone and a rate calculator (and also determine whether the tax is included in the item's original amount or not).



Below is an example of filling out the Tax Rate:



Make sure to enter $0.00 in the Rate field as Avalara will automatically calculate it.





Avalara Tax Rate setup
Avalara Tax Rate setup




Avalara Settings tab reflect the values entered in the Environment Variables done above

Click on Avalara Entity Use Codes if you are planning to exempt some customers from paying taxes.

The code field is the value you will use, and the field name is the description you will show to the customer. You can either show “code - name”, like "A - FEDERAL GOV", or you can just show the name field.



Entity Use Codes are one method for keeping track of tax-exempt customer transactions. When entering transactions with an entity use code, AvaTax will exempt the transaction as long as the code is valid for the customer and region where the transaction takes place.



Once everything has been setup, we recommend you created a manual order and click on Test Connection in Avalara Settings tab



Test Connection
Test Connection




Succesful Ping
Succesful Ping




You can select the tax-exempt code for your customers in the Users table



Users
Users




You have just finished setting up your Avalara tax!





Updated 02 May 2023
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