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Avalara Help Center

Manage Taxability of Products and Services

Apply tax codes to manage item taxability. Assigning product and product categories to items gives you important jurisdictional subtlety in taxability. Avalara has predefined Avalara tax code with a taxability profile in place for all US states. Or, create your own custom tax codes and tax rulesHoverTT.png in AvaTax. Keep in mind that Avalara updates Avalara tax code when taxability rules change, but custom tax codes and rules are maintained by you; they're not updated when tax laws change. Also, make sure you enable nexus in the jurisdictions where you're required to register and collect tax so AvaTax calculates the full tax amount.

Create a sales tax code

AvaTax for Microsoft Dynamics AX 2009 requires the use of its own tax codesHoverTT.png. Follow these steps to create a sales tax code before you map your items or groups of items to a tax code.

  1. Go to Accounts Receivables > Common Forms > Customers > Choose Customer > Setup tab
  2. Click Sales Tax to expand the section.
  3. Click Sales Tax Codes.
  4. Click in the grid and click New.
    1. In the Sales Tax Code column, type the missing AvaTax code.
    2. Complete the following fields:
      • City
      • Country
      • County
      • Special1
      • Special2
      • Special3
      • State
    3. In the Name field, type AvaTax <Tax Code>.
    4. In the Settlement Period field, type AV.
    5. In the Ledge Posting Group field, type AVATAX.
    6. In the Origin field, select Percentage of the Net Amount.
  5. Click Values.
    1. In the From Date field, type a date prior to the date that you implemented AvaTax for Microsoft Dynamics AX 2009.
    2. In the To Date, type 12/31/2099.
    3. In the Minimum Limit field, type 0.00.
    4. In the Upper Limit field, type 0.00.
    5. In the Value field, type 0.00.
  6. Click Save.

Map an item to a tax code

  • A tax code is a unique code for similar products, services, or charges that tells AvaTax what kind of sales tax, if any, to charge for them. 
  • It's a best practice to map items to tax codes in your accounting software. 
  • If you can't pass a tax code from the item management screen, or if you need a remotely-hosted mapping system to accommodate multiple integrations, map the items to tax codes in AvaTax.
  • If you map in your accounting software and AvaTax, the AvaTax mapping supersedes any mapping in your accounting software.
How Do I Map Tax Codes - Final.png

 

  1. In Microsoft Dynamics AX 2009, go to Avalara AvaTax > Setup > Configuration Setting > General > General Options tab.
  2. Select Tax Mapping Code and then click the Tax Code Mapping button that appears.

    MAX - 2012 - taxability code mapping 1.png

  3. In the Tax Code Mapping window, map your item to a tax code:
    1. Select one of the following Document Type:
      • Item
      • Fee
      • Hour
      • Expense
      • Project Item
      • Ledger Account
    2. Select the Item/Category/Account as applicable.
    3. Type the Taxability Code. This code can be an AvaTax system tax code or a custom tax code.
    4. Click Close.

    MAX - 2012 - taxability code mapping 2.png

  4. Click Save.

Map product classes to tax codes

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.

Exceptions & considerations for product class item mapping

If you're a SST (Streamlined Sales Tax) returns customer you need to run your configuration options by your GoLive Implementation Consultant. There are specific product description requirements which may not allow you the option to use product class item mapping.

Mapping within the Admin Console always supersedes item mapping within an accounting software or ERP system.

If you have multiple AvaTax integrations, such as an ERP system and an Ecommerce platform, you need to verify that item mapping is consistent between the two platforms. Items within an ERP system are often categorized without sales tax in mind which can lead to confusion and miscalculations when product class mapping is applied.

Let’s use the example of a clothing company:  

Within their ERP system they have categories for pants, shirts, accessories, and shoes. These categories are set up with the order fulfillment center and used to help track and maintain inventory. For the AvaTax integration this company has decided they want to utilize the product class mapping feature available to their ERP system which will allow them to map by several items at a time instead of mapping to each individual item. This will help them calculate the appropriate sales tax for the hundreds of varieties of shoes they sell. The first thought in regards to mapping the shoe category is to use tax code PC040144 which is for shoes and shoe laces. One easy to manage tax code for their entire assortment of shoes, which sounds great! Let’s then take into consideration that out of the different varieties they sell they offer ballet & tap shoes. In this instance they may run into taxability issues as ballet & tap shoes may not be classified as clothing items depending on which states are involved. In fact, AvaTax offers the system tax code of PC040401 specifically for ballet & tap shoes. From here this company has additional configuration options to consider.

Map tax codes to a product class

The Tax Code Mapping utility in AvaTax for Microsoft Dynamics AX lets you look up and select tax codes and map them to items. There are two ways to map one tax code to a collection of items.

To map tax to items, follow one of these two steps:

  1. Option 1:
    1. Open AvaTax for Microsoft Dynamics AX.
    2. Navigate to Administration.
    3. Locate AvaTax.
    4. Click + in front of Setup.
    5. Click Configuration Settings.
    6. Select the General tab.
    7. Click Tax Code Mapping. Follow these steps in the form:
      1. Click in the grid.
      2. Add new:
        • Click New icon,
        • Press Ctrl+N, or
        • Click File and select New.

          AX-product item class mapping.png

      3. In the Document Type column, click the menu and scroll through the list of Types you can map to. Select the desired type.

      4. In the Item/Category/Account column, click the menu and select the appropriate Category you want to map.

      5. In the Taxability column, enter the AvaTax code you want to use. You can find the  tax codes list here.

      6. Click the Save icon.

    8.        Exit the form.

    9. Exit Configuration.

  2. Option 2:
    1. Open AvaTax for Microsoft Dynamics AX.
    2. Navigate to Administration.
    3. Locate AvaTax.
    4. Click + in front of Utilities.
    5. Click Tax Code Mapping.
      1. Click in the grid.
      2. Add new:
        • Click New icon,
        • Press Ctrl+N, or
        • Click File and select New.

          AX-product item class mapping.png
      3. In the Document Type column, click the menu and scroll through the list of Types you can map to. Select the desired type.
      4. In the Item/Category/Account column, click the menu and select the appropriate Category you want to map.
      5. In the Taxability column, enter the AvaTax code you want to use. You can find the  tax codes list here.
      6. Click the Save icon.
    6. Exit the form.
    7. Exit Configuration.