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Install and Configure Avalara AvaTax for Microsoft Dynamics 365 Business Central

After you activate AvaTax Update and set up your company profile, install and configure AvaTax Update for your accounting software. During configuration, customize your setup to fit your unique business needs for things like:

  • Tax calculation settings for various tax types
  • Exemption settings if you have exempt customers
  • Product taxability settings

Alter these settings when your business needs change.

We recommend you contact Avalara Professional Services before you install and configure AvaTax Update for your accounting software for help with implementation.

Install AvaTax Update for Microsoft Dynamics 365 Business Central

AvaTax Update for Microsoft Dynamics 365 Business Central is available to install through Microsoft Dynamics 365 Business Central.

To install AvaTax Update for Microsoft Dynamics 365 Business Central:

  1. In Microsoft Dynamics 365 Business Central, search for Extension Management, and then click Extension Management to open the Extension Installation window.
  2. Click Extension Marketplace, search for Avalara AvaTax, and then, under Avalara AvaTax, click Free Trial.
  3. Fill in the required fields, accept the terms and conditions, and then click Continue.
  4. Select the language to use, and then click Install.
  5. After the installation success message displays, to confirm installation was successful, log out of Microsoft Dynamics 365 Business Central, log back in, and then go to Administration > IT Administration > Extensions. The installation state displays on the extension.

Set up AvaTax Update for your accounting software

To set up AvaTax Update for Microsoft Dynamics 365 Business Central:

  1. Log in to Microsoft Dynamics 365 Business Central, search for AvaTax, and then click Avalara AvaTax Setup Assistant.
  2. To confirm your account credentials:
    1. Next to Enter Your Avalara Credentials and Company Code, click Assist Edit SetupAssistant-AssistButton.png, and then click Start Setup. The Avalara AvaTax Account Credentials window opens.
    2. Fill in the following, and then click Test Connection:
      Field Action
      • Account Number
      • License Key
      Use the information provided in an email from Avalara (sent to the email account you used to activate your account). It must match what's saved in AvaTax Update.
      Web Service URL
      • If you have an AvaTax Update development account, select Sandbox.
      • If you have an AvaTax Update production account, select Production.
      Company List Select the company code you created when you activated your AvaTax Update account. Every accounting software that works with AvaTax Update uses a company code to identify itself to AvaTax Update.
  3. To map the tax area code:
    1. Next to Map General Ledger Account(s) to AvaTax Tax Area Code, click Assist Edit SetupAssistant-AssistButton.png, and then click Start Setup. The Avalara AvaTax Tax Area Code window opens.
    2. In the Map Tax Area Code section, from the Tax Area Code list, select AVATAX.
    3. Click the arrow to the right of the Set G/L accounts in Tax Jurisdictions list, and then, for the tax area code selected, choose the G/L accounts to use from the Tax Account (Purchases) and Tax Account (Sales) lists.
    4. To apply the tax area code to existing customers or vendors, in the Area Tax Code Mass Update Utility section, click the arrow to the right of the  Set Tax Area Code list, fill in the following, and then click Update:
      Field Action
      Tax Area Code Select the tax area code to use (e.g., AVATAX)
      Content Type Select either Customer or Vendor
      Selection Range Select the range of customer or vendor records to which this applies
  4. To  set up address validation for accurate tax calculation:
    1. Next to Enable Address Validation for USA and Canada, click Assist Edit SetupAssistant-AssistButton.png, and then click Start Setup. The Avalara AvaTax Validate Address window opens.
    2. Click Set Country Codes for Address Validation, and then select the country for which you want to enable address validation. If you disable address validation, AvaTax Update uses the customer's ship-to address as entered to calculate the correct sales tax.
    3. To disable address validation for a country, clear the selection.
  5. To test your AvaTax Update connection, next to Test Calculating Tax, click Assist Edit SetupAssistant-AssistButton.png, and then:
    • If you see a success message, click Close.
    • If you see any other message, repeat the previous steps, confirming you've entered all information correctly.

Configure AvaTax Update for your accounting software

After you've setup AvaTax Update for Microsoft Dynamics 365 Business Central, configure your company settings.

  1. Log in to Microsoft Dynamics 365 Business Central, search for AvaTax Configuration, and then click Avalara AvaTax Configuration.
  2. On the Account Credentials tab:
    1. Click Edit Settings to modify information in the following fields:
      Field Action
      • Account Number
      • License Key
      Use the information provided in an email from Avalara (sent to the email account you used to activate your account). It must match what's saved in AvaTax Update.
      Web Service URL
      • If you have an AvaTax Update development account, select Sandbox.
      • If you have an AvaTax Update production account, select Production.
      Company Code Select the company code that you created in AvaTax Update from the list. Every accounting software that works with AvaTax Update uses a company code to identify itself to AvaTax Update.
    2. Click Verify Credentials to verify the added or updated account credentials. You must supply the AvaTax Update license key to verify your credentials.
  3. On the General tab, fill in the following:
    Field Action
    Tax Mapping Code Enable to map items to Avalara tax codes to account for varying taxability of products and services. Note: Item Tax Code Mapping takes precedence over Item Tax Class Mapping.

    Optional:  

    • User Defined 1
    • User Defined 2
    Select the type of data you want to send to AvaTax.
    Optional: Send Item account to AvaTax Select to send the general ledger account number for an item to AvaTax Update for reporting purposes. The number displays in the Revenue Account field on the line item.
    Update Default Data Select Country Code.
    Extensive Logging Select to have the AvaTax Update service log pushed to Avalara Portal. The log is used for troubleshooting.
  4. On the Tax Calculation tab, fill in the following:
    Field Action
    Optional: Disable Tax Calculation If you choose to disable tax calculation, your accounting software no longer uses AvaTax Update to calculate tax on transactions.
    Optional: Always Check Address Before Calculating Tax

    Select to display address validation results for each transaction. Selecting this option may result in additional transaction fees.

    AvaTax Update does an implicit address validation during the tax calculation process however, it doesn't display the results in the user interface. Validated addresses are stored in the transaction but not on the source record. 

    AvaTax Update may still calculate taxes on the transaction, regardless of address validation results.

    Optional: Show AvaTax Tax Details Before Sales Statistics Window Select to view the AvaTax Update-calculated sales tax details before they show in the sales statistics page.
    Optional: Use UPC as Item Code Select to send a UPC instead of an item code to AvaTax Update. Talk to your Customer Account Manager (CAM) for more information.
    Optional: Enable Tax Amount Adjustment

    Select to add a SALESTAXADJUST line item for sales credit memos and service credit memos. This lets you create transactions with a tax-only credit. 

     Exempt Processing
    • Sell-to Customer: This is the default setting. If selected, the exemption processing is based on the sell-to customer exemption details.
    • Bill-to Customer: If selected, the exemption processing is based on the bill-to customer exemption details.
    • Transaction Level: If selected, the exemption processing is based on the transaction-level exemption details, found at Avalara Functions > Additional Information on a transaction.
    Optional: Enable Entity Use Code Enable to map entity/use codes for your customer addresses to flag them as exempt from sales tax.
    Source Code
    • Sell-to Customer: If selected, AvaTax Update uses the sell-to customer from the transaction header as the source in tax calculation.
    • Bill-to Customer: If selected, AvaTax Update uses the bill-to customer from the transaction header as the source in tax calculation.
    Tax Area Code

    Identifies the default sales tax group. Select AVATAX to use AvaTax Update as the tax calculation method.

    Return Address Select the address you want to use for return orders and credit memos.
    • Shipping: Use the ship-to address.
    • Customer: Use the sell-to address.
    • Invoicing: Use the bill-to address.
    Enable Asynchronous AvaTax Posting
    • If this option is disabled, after AvaTax Update calculates sales tax, it posts the transaction to both Microsoft Dynamics 365 Business Central and AvaTax Update. After posting, the Doc Status of this transaction in AvaTax Update is Committed. 
    • If this option is enabled, after AvaTax Update calculates sales tax, it only posts the transaction to Microsoft Dynamics 365 Business Central. To post the transaction to AvaTax Update, use the Asynchronous Posting utility. After you run the utility, the Doc Status of this transaction in AvaTax Update changes from Uncommitted to Committed. 
    Use Tax Assessment
    • Optional: Enable Use Tax Assessment: If enabled, your accounting software uses AvaTax Update to calculate consumer use tax on purchase invoices.
    • Credit GL Account: Select the accrual account to which you want to credit your accrued use tax.
    • Debit Account Options: Select the type of account from which to debit use tax assessments. If you select Single Account, select the account from the Debit GL Account list. If you select Inventory Account, the amount will be debited to the associated inventory posting account.
    • Debit GL Account: If you select Single Account, select the account from which to debit use tax assessments.
    • Gen. Journal Batch Name: Select AvaTax to see the journal source of AvaTax Update.
  5. On the Address Validation tab, fill in the following:
    Field Action
    Optional: Disable Address Validation

    If you disable address validation, AvaTax Update uses the customer's ship-to address as entered to calculate the correct sales tax.

    If an address can't be validated at the street level during tax calculation, AvaTax Update uses the city, state, and ZIP or Postal Code to calculate sales tax.

    Optional: Return Results in Uppercase Select to save all address validation results in uppercase format.
    Optional: Country Codes for Address Validation

    Click Set Country Codes for Address Validation, and then select the countries for which AvaTax Update validates addresses. (AvaTax Update validates addresses only in the United States and Canada.)