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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 QuickBooks Desktop

  1. Go to File > AvaTax > Utilities > Avalara CertCapture .
  2. In the Avalara CertCapture window, select a customer.
  3. On the Create customer tab, add your customer's address and then click Validate address. Click Add new customer in CertCapture. The message "Customer Added to Avalara CertCapture Successfully." is shown. Click OK and then, click Close.

Request an exemption certificate

  1. Go to File > AvaTax > Utilities > Avalara CertCapture.
  2. In the Avalara CertCapture window, select a customer.
  3. Go to the Initiate an exemption request tab:
    1. Go to the Send method section and select one of the options for communication. Click the link mentioned in the communication and complete the exemption certificate request process.   
    2. Add a custom message to communicate instructions when you are using the Communication mode as Fax
    3. Click Initiate certificate request.

      The message "The exemption certificate workflow request has been successfully generated. Tracking code is - xxxx-xxxxxxx" is shown. Click OK and then, click Close.

Use AvaTax Exemptions

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.

Use an exemption certificate number

To exempt customer from sales tax using the customer's tax registration/exemption number, follow these steps: 

  1. Go to Customers > Customer Center and click the customer you want to exempt.
  2. In the Customer card window, go to the Sales Tax Settings tab. Select Tax Code as Non and in the Resale No field, type the tax registration/exemption certificate number.
  3. Click OK. This customer is now exempt from sales tax.

Use entity/use code in QuickBooks Desktop

Entity/use codes are AvaTax Update specific designations, identifying various categories of exempt customers. Each entity/use code is associated with exemption tax rules for each state indicating applicable exemption scenarios. An invoice or credit memo using an entity/use code to trigger a customer exemption also uses the entity/use code to classify transactions for detailed exemption reporting within AvaTax Update.

Before you assign an entity/use code to a customer, ensure that Enable Entity/Use Code is enabled in Avalara settings. To exempt a customer by assigning an entity/use code, follow these steps:

  1. Go to Customers > Customer Center and click the customer you want to assign an entity/use code.
  2. In the Customer card window, go to the Additional Info tab. Type the entity/use code in the Customer Type field. All transactions with this entity/use code are now exempt from sales tax.
  3. Click OK.

 

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