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Who You Exempt

If you regularly sell to customers who're exempt from tax, you need to store their exemption certificates and consistently exempt their purchases. There's more than one way to exempt customers:

  • If you already have a method to store exemption certificates, send AvaTax Update your customers' exemption certificate numbers using your accounting software, or send us entity/use codes that explain why the customer should be exempt.
  • If you don't have a way to store certificates, use AvaTax Exemptions or CertCapture, depending on your needs:
    • To exempt buyers and store their exemption certificates, use AvaTax Exemptions.
    • To exempt customers, and to request, generate, and store exemption certificates, use CertCapture.
You can exempt customers, but that doesn't mean you're compliant. You need valid documentation of your buyer's exemption certificate to support tax exemptions in case of an audit. Valid documentation includes copies of valid exemption certificates and the associated invoices. If you exempt customers from tax with exemption numbers or entity/use codes, keep organized records for all exempt purchases. Exemption Certificate Example - Thumb.png

Use CertCapture

CertCapture manages exemption certificates and other compliance documents. It can be used with or without AvaTax Update. Use CertCapture to:

  • Send mail or email campaigns to ask your customers for certificates
  • Keep your customers' exemption certificates in one place, so you're ready for audits
  • Connect CertCapture to AvaTax Update to automatically exempt purchases from tax when appropriate

CertCapture stores exemption information and official copies of exemption certificates for each customer. With CertCapture, you always have an organized, audit-ready database of exemption certificates.

If you're not using CertCapture to manage exemption certificates, contact your Customer Account Manager (CAM) for more information.

Add a customer record to CertCapture from your accounting software

  1. Go to Accounts receivable > Common > Customers > All customers.

  2. In the Customer Master window, you can either directly click AvaCerts > Create Customer or select a customer and then click AvaCerts > Create Customer.
  3. In the Create customer record in AvaCert window:
    1. Go to the Overview tab and select the customer address.

      DAX_2overviewtab.png

    2. On the Address tab, click Functions and then click Validate the address.

      DAX_3AddressTab.png

    3. On the Contact information tab, type the contact details for your customer.

      DAX_4ContactDetails.png

    4. Click Send. The message "Customer record has been successfully created in AvaCert" is shown. Click OK.

      DAX_5success.png

    5. Click Close.

Request an exemption certificate

  1. Go to Accounts receivable > Common > Customers > All customers.

  2. In the Customer Master window, you can either directly click AvaCerts > Initiate Exemption Request or select a customer and then click AvaCerts > Initiate Exemption Request.
  3. In the Exemption certificate request workflow window:
    1. To choose how to send a certificate request to a customer, in the Send Method section, select Email or Fax or Mail.   
    2. You can add a custom message to the request. This field is useful for communicating instructions if you send the exemption request via Fax.
    3. Click Send.

      DAX_6Exemptioncertificatereq.png

      The message "The Exemption Certificate Workflow Request has been successfully generated. Tracking code is - xxxx-xxxxxxx" is shown. Click OK.

      DAX_7certinitial_success.png

    4. Click Close.

Use AvaTax Exemption

AvaTax Exemptions is included with AvaTax Update. To exempt a transaction from tax using AvaTax Exemptions, enter information from your customer's exemption certificate into AvaTax Update. AvaTax Exemptions stores the information with your customer's AvaTax Update record, so their future transactions are exempt.

You need copies of all of your customers' exemption certificates in case of an audit. AvaTax Exemptions allows you to store up to 25 exemption documents for free. You can upgrade AvaTax Exemptions if you need to store more than 25 documents.

Add your exempt customers and their exemption information under Settings > Manage Your Exempt Customers.

To optimize compliance, require an exemption certificate for exempt customers in AvaTax Update under Settings > Manage Advanced Account Settings.

Use exemption certificate numbers or entity/use codes

An exemption certificate number identifies a buyer as exempt. To exempt a customer, enter the buyer's exemption number on the invoice when making a sale.

AvaTax Update uses an entity/use code to exempt a customer from tax. An entity/use code works in two ways:

  • The code flags a transaction with a reason for the exemption based on the entity that's buying
  • The code flags a transaction based on how the buyer will use what they purchase

Entity/use codes are applied based on government laws. Use your accounting software to assign entity/use codes to your transactions.

Exempt customers from sales tax with an exemption certificate number

To update the sales tax group, determine the customer you want to update and perform the following updates:

  1. Go to Accounts Receivables > Common Forms > Customers > Choose Customer > Setup tab to open the Customer Card.
  2. Locate the Tax Exempt Number drop-down box
  3. Click the down arrow and click the appropriate tax exemption number for this customer.
  4. Every sale for this customer is now be exempt from tax.

Exempt customers from sales tax with an entity/use code

Use the entity/use code mapping menu to assign a specific entity/use code to a specific customer address.

  1. Go to Avalara AvaTax > Utilities > Entity Use Code Mapping menu.
  2. Click in the grid and click the NEW icon.
  3. Click New Line.
  4. In the Customer Account field, select a customer from the drop-down menu.
  5. In the Address Name field, select the name for this address from the drop-down menu.
  6. In the Address field, select an address for that customer from the drop-down menu.
  7. In the Entity Use Code field, select an entity/use code from the drop-down menu.
  8. Click the Save icon. Every sale for the customer at this address will be exempt from tax within the extent that exemption codes can exempt tax at that jurisdiction.

    EntityUseCode.png

 

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