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.
Typically, a business must have a “substantial physical presence” in a taxing jurisdiction to have nexus there. The following items may constitute a “substantial physical presence” in a taxing jurisdiction, and therefore an obligation to calculate, collect, report, and remit tax:
- A corporate office, storefront, or remote sales office
- Remote employees working from home on the company payroll
- Owned or rented warehouse space containing owned inventory
- Owned inventory leased to a customer
- Sales or marketing representatives making regularly scheduled visits
- Delivery of product by a company-owned vehicle
Rules governing what constitutes nexus vary from jurisdiction to jurisdiction. Determining exactly how a rule applies to your business is critical. 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.
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 ato 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 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.
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.