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.
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 configure your accounting software to map Avalara tax codes in your accounting software, check your accounting software configuration documentation. See our handy chart for a little guidance deciding whether you should map items to Avalara tax codes in your accounting software or directly 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 universal product codes (UPCs), 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.
Map an item to a tax code
- Click File > AvaTax > Preferences.
- On the Taxability tab, click Item Tax Code Mapping and complete the following fields:
- Next to the Item Type field, select All from the drop-down menu
- Next to Item Name, select the Item from the drop-down menu
- In the Tax Code field, type the Tax Code
- Click Add, and then click OK.
Map an item to a UPC
Instead of using Avalara tax codes, send the model number or the UPC from your accounting software to AvaTax Update. If the UPC isn't available, the model number is set as the default and sent to AvaTax Update. To customize taxability for specific products, items need to be mapped to UPCs and model numbers.
To send a UPC to AvaTax Update, you need to configure UPC, and then map it to an item in QuickBooks Desktop. To map UPC, follow these steps:
- Go to File > AvaTax > Preferences > Taxability > UPCs tab.
- Select the item code you want to map in the UPC field, and then click Save.