Some products and services are taxed differently in different jurisdictions. Apply Avalara tax codes to products and services you sell to help account for this varying taxability. There are a few different ways you can apply, or map, Avalara tax codes to your products and services:
- Map items to predefined Avalara tax codes; associate a code with each item you sell so AvaTax Update knows which tax rate to apply
- Map items to universal product codes (UPCs)
Items that aren't mapped to Avalara tax codes are treated as Tangible Personal Property (TPP), and are fully taxed during calculation.
Map items to tax codes
The process is simple. Map items to Avalara tax codes, and when your accounting software processes transactions or when you upload the transactions to AvaTax Update, AvaTax Update determines the taxability for the items you sell based on the rules behind these Avalara tax codes. For more information about Avalara tax codes, see Select Avalara Tax Codes.
Avalara recommends you map items to Avalara tax codes in your accounting software. To learn how to map Avalara tax codes in your accounting software, check your accounting software documentation. See our handy chart for a little guidance deciding whether you should map items to Avalara tax codes in your accounting software or in AvaTax Update. To map items to Avalara tax codes in AvaTax, go to Settings > Manage items with special tax treatment.
Keep in mind that Avalara updates Avalara tax codes when taxability rules and laws change, but you have to maintain your own custom tax codes and rules; these aren't automatically updated when changes occur. To be sure you're using the most current rules to tax your products and services, use Avalara tax codes. If you map your items to UPCs (universal product codes), you don't need to use Avalara tax codes because UPCs already have taxability rules associated with them.
If you map in your accounting software and in AvaTax Update, the mapping in AvaTax Update overrides any mapping in your accounting software.
Configure tax code mapping
To configure tax code mapping for an item in AvaTax Update for Microsoft Dynamics GP, follow these steps:
- Ensure that the Tax Code Mapping option, in Configuration, is Taxability or custom-defined.
- On the Cards menu, point to Inventory and then click Item.
- In the Item Maintenance dialog box, next to Item Number, click the search icon.
- In the Items dialog box, click any item and then click Select.
- In the Item Maintenance dialog box, click Options.
- In the Item Maintenance Options dialog box, in the Category field, type either the Avalara tax code or a custom tax code type for this item. Click Ok.
Map an item
To assign a tax code to an item in AvaTax Update for Microsoft Dynamics GP, follow these steps:
- Open an Item Maintenance card.
- Click Options.
- In the Item Maintenance Options card, locate the Category list.
- Type the Tax Code in the Tax Code field, or the Taxability field, depending on the version of AvaTax Update installed.
- Click OK.
- Click Save.
Map tax codes to product class
Product class item mapping refers to the ability to link a single tax code to a collection of item numbers or SKU’s within an ERP system. The benefit of being able to use product class item mapping is that you can assign one code to tens, hundreds, or thousands of SKU’s in a single instance, which is ideal for companies that have an extensive product catalog. Another benefit is that you can readily monitor and keep track of your item master list within the ERP system without having to maintain an item mapping matrix outside of your item master list.
Criteria for mapping tax codes to a product class
A user-defined field called Taxability can be available in both the item class and the item. AvaTax Update for Microsoft Dynamics GP will only send the tax code from the item class if the item does not have a tax code.
To get there, follow these steps:
- On the Microsoft Dynamics GP menu, point to Tools, Setup, System, and AvaTax Update, and then click Configuration.
- In the Avatax Configuration dialog box, on the left, click General, click Enable Item Tax Class Mapping, and then click OK.
- Next to Item Class Mapping, select TAXABILITY.
- The items in the Item Class must not be individually mapped in the Item Maintenance Options window.