Skip to main content
Avalara Help Center

Tell Us Where You Collect and Remit Tax

This article applies to:Avalara AvaTax Update

Add regions and local authorities to tell AvaTax Update when and where to calculate and report taxes for your company. A region is a state, province, or territory. A local authority is a county, city, or special tax jurisdiction. Regions and local authorities are the jurisdictions where you have nexus. These are added when you set up and activate your company in AvaTax Update. To add, edit, or export regions and local authorities after setting up your company, go to Settings > Manage Where You Collect and Remit Tax. When you tell us where you collect and remit tax, select a tax type for states that have both sales tax and seller use tax. For more information, see States and Tax Types

Nexus is the connection or relationship a business has with a taxing jurisdiction in which it sells products and services. This connection obligates the business to calculate, collect, report, and remit taxes. State and local authorities have varying definitions as to what constitutes nexus and who is liable for collecting and remitting sales and use taxes in their jurisdictions. 

Learn more about activities that may give your business a nexus obligation.

Rules governing what constitutes nexus vary from jurisdiction to jurisdiction. Determining exactly how a rule applies to your business is critical.

Having a physical location in a jurisdiction is a common reason to have nexus there. For businesses without any physical presence in a jurisdiction, many jurisdictions also have sales or transaction thresholds for when remote businesses need to start collecting and remitting sales tax. AvaTax Update provides warnings when it seems like you might be crossing these economic thresholds, but if you're at all uncertain about where you should be collecting and remitting taxes:

  • Contact the appropriate state or local tax agencies. Each state defines the rules for when a business is required to collect and remit sales and use tax. Therefore, each state's tax agencies are the source for the final decision regarding if you need to collect and pay sales tax based on your business practices.
  • Contact your Customer Account Manager (CAM) for more information about Avalara Professional Services. Avalara provides a variety of professional tax services, including nexus studies, voluntary disclosure agreements, and tax registration services.

PLAY-BLUE-30px.png What Is Nexus? | All About Tax Compliance

Jurisdiction begin and end dates

Jurisdictions are added in AvaTax Update as regions and local authorities. Each jurisdiction you add includes a begin date and an end date. AvaTax Update compares the document date of a transactionHoverTT.png to the begin and end dates of the appropriate jurisdiction. If the document date occurs between the two dates, AvaTax Update processes the transaction. AvaTax Update calculates a 0.00% tax for all other transactions.

Change the begin date and/or end date for a jurisdiction to meet your business transaction processing needs. For example:

  • If your business is going to establish nexusHoverTT.png in a jurisdiction, you can set the begin date to that future date. When AvaTax Update processes a transaction for that jurisdiction, it calculates tax based on the document date. If the document date occurs before the future date you set, the tax is 0.00%. If it occurs after the date you set, it's taxed according to jurisdiction rates.
  • Conversely, if your business will no longer have nexus in a jurisdiction, you can set the end date to that future date. If the document date of a transaction occurs before the future date you set, it's taxed according to jurisdiction rates. If it occurs after the date you set, the tax is 0.00%.

End dates take effect one second to midnight on that day. For example, an end date of 12/31/2099 will end nexus at 11:59:59 PM on 12/31/2099.

Change where you collect and remit tax

We don't recommend deleting a region or local authority unless it was added by mistake. Instead, we strongly recommend changing the end date for the jurisdiction to today's date. This allows AvaTax Update to process transactions, such as returns or credit memos, that may be entered in the future.

To add or edit regions and local authorities in AvaTax Update, go to Settings > Manage Where You Collect and Remit Tax

Keep track of economic thresholds

Many US states require you to collect and remit sales tax after your business passes certain sales or transaction thresholds within them, even if you have no physical presence there. If your AvaTax Update transaction data indicates that you might've passed one of these thresholds, an alert appears on the AvaTax Update home page to let you know. Since AvaTax Update doesn't know the full scale of your business, this data may be incomplete, so always double check these suggestions with Avalara Tax Advisory Services or your own tax professionals before registering your business in a new jurisdiction.

economic_threshold_screenshot.png

AvaTax Update uses only committed sales invoices to estimate where you need to register to collect and remit sales tax. Sale totals are the sum of all sales invoices in US dollars for relevant goods and services, minus any credits from return invoices. Tax exempt sales may be included in some regions, because AvaTax Update doesn’t differentiate between taxable and tax exempt sales if you haven’t registered to collect and remit in the jurisdiction. In California, AvaTax Update only tracks thresholds for the state, not for the local jurisdictions within it, which may have different rules. Learn more about economic thresholds by state.

Add states and locations to collect lodging, eWaste, and other taxes

AvaTax Update can calculate specific local taxes. Consult a tax professional about what taxes your business needs to collect and remit, and speak with your Customer Account Manager (CAM) about setting up AvaTax Update to calculate taxes beyond sales and use tax.

AvaTax-Update-Other-Tax-Types.png

  1. Go to Settings > Manage Where You Collect and Remit Tax, and then select your tax type.
  2. Depending on your initial setup, add a region where you collect the tax or add a local authority to a region where you're already collecting sales and use tax.
    • Add a new region - Click Add a Region and then check the box beside the state or region where you should collect. Click Add Selected Regions. AvaTax Update prompts you to select locals from a list.
    • Add a local authority to an existing region - Locate the region in the list and click Details. Select your tax type and click Add (Region) to where you collect.
  3. Click Add a Tax ID beside a country to modify its Tax ID or the place of supply settings for that particular location.
  4. Click Done with (Region Name) to finish.

Add international countries to collect VAT/GST or Customs Duty

If you have business outside of the US, AvaTax Update can calculate VAT/GST or customs duty for sales into certain countries. 

  1. Go to Settings > Manage Where You Collect and Remit Tax
  2. Select VAT/GST or Customs Duty, and then click Add a Region.
  3. Check the box beside any country where you do business, and then click Add Selected Countries.
  4. Click Add a Tax ID beside a country to modify its Tax ID or the place of supply settings for that particular location.
  5. Click Done with (Country Name) to finish.

Manage VAT settings for international locations 

AvaTax Update calculates VAT fees if your business has transactions into European Union member states, or any other country around the world that charges VAT. If you have international locations or are the importer of record for transactions into a country with VAT, manage your place of supply settings to help AvaTax Update apply VAT rules more precisely.

Adjust your VAT threshold settings if your business has sales that are below the VAT distance sales threshold in any country in which you do business.

  • Was this article helpful?