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 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.
Map items to tax codes
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, AvaTax 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 map Avalara tax codes in your accounting software, check your accounting software documentation. See our handy chart for a little guidance deciding whether you should map items to Avalara tax codes in your accounting software or in AvaTax.
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 UPCs (universal product codes), 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, the mapping in AvaTax overrides any mapping in your accounting software.
Configure tax code mapping
To configure tax code mapping for an item in AvaTax for Microsoft Dynamics GP, follow these steps:
- Ensure that the Tax Code Mapping option, in Configuration, is Taxability or custom-defined.
- On the Cards menu, point to Inventory and then click Item.
- In the Item Maintenance dialog box, next to Item Number, click the search icon.
- In the Items dialog box, click any item and then click Select.
- In the Item Maintenance dialog box, click Options.
- In the Item Maintenance Options dialog box, in the Category field, type either the AvaTax System Tax Code or a custom tax code type for this item. Click Ok.
Map an item
To assign a tax code to an item in AvaTax for Microsoft Dynamics GP, follow these steps:
- Open an Item Maintenance card.
- Click Options.
- In the Item Maintenance Options card, locate the Category list.
- Type the Tax Code in the Tax Code field, or the Taxability field, depending on the version of AvaTax installed.
- Click OK.
- Click Save.
Map tax codes to product class
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.
Criteria for mapping tax codes to a product class
A user-defined field called Taxability can be available in both the item class and the item. AvaTax for Microsoft Dynamics GP will only send the tax code from the item class if the item does not have a tax code.
To get there, follow these steps:
- On the Microsoft Dynamics GP menu, point to Tools, Setup, System, and AvaTax, and then click Configuration.
- In the Avatax Configuration dialog box, on the left, click General, click Enable Item Tax Class Mapping, and then click OK.
- Next to Item Class Mapping, select TAXABILITY.
- The items in the Item Class must not be individually mapped in the Item Maintenance Options window.
Map tax codes to a product class
To map tax to items, follow these steps:
- Click Cards.
- Click Inventory and select Item.
- Click Class ID.
- Click Option.
- Enter your Tax Code for the item in the Taxability field. You can find the tax codes list in the AvaTax System Tax Codes Toolkit.