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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 codes 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 codes 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.

Map items to tax codes

  • 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. Find your integration to learn how to map 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.
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Configure tax code mapping

To configure tax code mapping  for an item in AvaTax for Microsoft Dynamics GP, follow these steps:

  1. Ensure that the Tax Code Mapping option, in Configuration, is Taxability or custom-defined.
  2. On the Cards menu, point to Inventory and then click Item.
  3. In the Item Maintenance dialog box, next to Item Number, click the search icon.
  4. In the Items dialog box, click any item and then click Select.
  5. In the Item Maintenance dialog box, click Options.
  6. 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.

    DGP_item_maintenance_options.png

Map an item

To assign a tax code to an item in AvaTax for Microsoft Dynamics GP, follow these steps:

  1. Open an Item Maintenance card.
  2. Click Options.
  3. In the Item Maintenance Options card, locate the Category list.
  4. Type the Tax Code in the Tax Code field, or the Taxability field, depending on the version of AvaTax installed.
  5. Click OK.
  6. Click Save.

Map tax codes to product class

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.

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.

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To get there, follow these steps:
 

  1. On the Microsoft Dynamics GP menu, point to Tools, Setup, System, and AvaTax, and then click Configuration.
  2. In the Avatax Configuration dialog box, on the left, click General, click Enable Item Tax Class Mapping, and then click OK.
    DGP-avatax configuration.png
  3. Next to Item Class Mapping, select TAXABILITY.
  4. The items in the Item Class must not be individually mapped in the Item Maintenance Options window.
    1. If an item in an Item Class is mapped, then the item’s tax code mapping will take priority. This lets you set up mixed taxability in the same Item Class.
      DGp-itemclassmaintenance.png

Map tax codes to a product class

To map tax to items, follow these steps:

  1. Click Cards.
  2. Click Inventory and select Item.
    DGP-Cards-Inventory-Item.png
  3. Click Class ID.
  4. Click Option.
  5. 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.
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