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 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 ECMS or CertCapture, depending on your needs:
- To exempt buyers and store an image of their exemption certificates, use ECMS.
- To exempt customers, and to request, generate, and store exemption certificates, use CertCapture.
Use the Avalara Exemption Certificate Management System (ECMS)
If you use AvaTax, the Exemption Certificate Management System (ECMS) is a cost-free feature of your account. To exempt a purchase from tax using ECMS, enable ECMS in AvaTax, and then enter information from your buyer's exemption certificate into AvaTax. ECMS stores the information with your customer's AvaTax record, so their future transactions are exempt.
ECMS doesn't store a copy of your buyer's certificate. You need copies of all of your buyers' exemption certificates in case of an audit, so if you use ECMS to exempt buyers from tax, maintain organized records of your customers' exemption certificates.
CertCapture manages exemption certificates and other compliance documents. It can be used with or without AvaTax. 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 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 using CertCapture to manage your exemption certificates, learn more about how it works. If you're not using CertCapture to manage exemption certificates, contact your Customer Account Manager (CAM) for more information.
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 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 with exemption certificate number
To update the sales tax group, determine the customer you want to update and perform the following updates:
Map entity/use codes
Use the entity/use code mapping menu to assign a specific entity/use code to a specific customer address. For more information about available entity/use codes, see exemption reason matrices.
- Go to General Ledger > Setup > Sales tax > AvaTax > Utilities > Entity Use Code Mapping menu.
- Click in the grid and click the NEW icon.
- Click New Line.
- In the Customer Account field, select a customer from the drop-down menu.
- In the Address Name field, select an address for that customer from the drop-down menu.
- In the Entity Use Code field, select an entity/use code from the drop-down menu.
- 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.