Skip to main content
Avalara Help Center

Exempt Customers from Sales Tax

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 using Avalara products.

Use CertCapture

CertCapture is an application that manages exemption certificates and other compliance documents. It can be used with or without AvaTax. With CertCapture:

  • Send mail or email campaigns to ask your customers for certificates
  • Keep your customers' current and historic 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 copies of exemption certificates for each customer. With CertCapture, you always have an organized, audit-ready database of exemption certificates.

If you're not using CertCapture to manage exemption certificates, contact your Avalara Customer Account Manager (CAM) for more information.

Configure CertCapture in AvaTax

To configure CertCapture for an AvaTax account, follow these steps:

  1. In AvaTax, go to the Organization tab, and then select a company.
  2. On the Company page, click the Exemptions tab.

    NS_Cetcapture2.png

  3. On the Exemptions tab, click AvaTax Certs Company Settings.
  4. In the Edit: AvaTax Certs Company Settings window, type your AvaTax Certs Client Code and AvaTax Certs Org Code. Set the AvaTax Certs Status as Enabled and click Save.
    NS_Cetcapture4.png

Add a customer record to CertCapture from Microsoft Dynamics NAV

To add a customer record to CertCapture from Microsoft Dynamics NAV, follow these steps:

  1. Go to Departments > Sales and Marketing > Order Processing > Customers.
  2. In the Customers window, go to Navigate > CertCapture > Add customer to CertCapture.
  3. In the Add Customer: Customer Card window:
    1. Add the relevant details. Ensure that you add the address details and the email address. 

      DNAV_AvaCert01.png

    2. Click Validate Address  to ensure the address is formatted correctly.
    3. Click Add Customer. The message "Customer successfully created" is shown. Click OK.
    4. In the Add Customer: Customer Card window, click OK.

Request an exemption certificate

Once a customer is added to Microsoft Dynamics NAV, request an exemption certificate from them.

  1. Go to Departments > Sales and Marketing > Order Processing > Customers.
  2. In the Customers window, select a customer and then click CertCapture > Request exemption certificate.
  3. In the Request exemption certificate: Customer Card window:
    1. To choose how to send a certificate request to a customer, select the Communication mode. Click the link in the communication and complete the exemption certificate request process. 
    2. Click Request exemption certificate. A message displays on the screen and an email notification is sent to you when the request is placed in CertCapture. Click OK.

      DNAV_AvaCert04.png

  4. To check the status of your certificate request, click CertCapture > Retrieve certificate(s) status. In the View - Certificate Status window, you can review a list of exemption certificates and their request status. Once a customer's exemption certificate is in the system, they're exempt from sales tax. Click Close.

    DNAV_AvaCert05.png

    The Request stage can be either of the following options:

    The Request Status can be Open or Closed.

    • REQUESTINITIATED:  You've sent the email, fax, or letter to the customer.
    • CUSTOMERRESPONDED: The customer has received an exemption certificate request and has responded to it by entering the wizard, but they haven't faxes the certificate. . 
    • CERTIFICATERECEIVED:  The customer has faxed the certificate to CertCapture.
  5. To retrieve the certificate, go to Navigate > CertCapture > Retrieve certificate(s).
  6. In the Edit - Certificate Details window:

    DNAV_AvaCert06.png

    1. On the Certificate Details tab, select the certificate.   
    2. To download the certificate, click the following buttons and follow the steps in your computer for downloading a document.
      • To download the certificate in .png format, click Get Certificate as PNG.
      • To download the certificate in .pdf format, click Get Certificate as PDF.

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.

Use an exemption certificate number or entity/use code

An entity/use code is a string of characters that tells AvaTax to exempt a transaction from tax. It's called an entity/use code because it flags a transaction with a reason for exemption, based on the kind of entity that's buying - or how the buyer will use what they purchase. An exemption certificate number is a unique string of numbers found on an exemption certificate.

If you use AvaTax and want to exempt a transaction using an entity/use code, enable this option in your AvaTax Configuration menu in your accounting software, and then choose a code from available options in your accounting software when processing a transaction. To exempt a transaction using an exemption certificate number, enter the number when processing the transaction. Your accounting software may not support entity/use codes and exemption certificate numbers, so check your accounting software documentation to confirm that it can pass these codes.

Passing an entity/use code or an exemption certificate number exempts a transaction from tax, but it doesn't attach exemption information or store a copy of your buyer's certificate. You need complete records to support tax exemptions in case of an audit. If you exempt transactions from tax with entity/use codes, maintain organized records for all exempt purchases. For a list of available entity/use codes and their taxability by state or matrix, see Exemption Reason Matrices for US and Canada (Entity/Use Code List).

Use an exemption certificate number in Microsoft Dynamics NAV

  1. In Microsoft Dynamics NAV, go to Departments > Sales & Marketing, and then click Sales.
  2. Go to Lists > Customers.
  3. Select a customer.
  4. In the Edit - Customer Card window, go to Invoicing, type Exemption Certificate Number in Tax Exemption No, and then click OK.

    NAV_FlagCustomerExempt1.png

Add entity/use codes

You can add to or edit the existing list of entity/use codes HoverTT.png.

  1. In Microsoft Dynamics NAV, go to AvaTax > Setup.
  2. Go to Administration, and then click Entity/Use Code.
  3. In the Edit - Entity/Use Code Mapping window:
    • To add a new entity/use code, click New. 
    • To change the list of entity/use codes that come with AvaTax, click Edit.  
    • To restore the default list of entity/use codes that come with AvaTax, click Restore default values.

Map entity/use codes to customers

  1. In Microsoft Dynamics NAV, go to Utilities > Administration and click Entity/Use Code Mapping.
  2. In the Edit - Entity Use Code Mapping dialog box, under Entity Use Code, select an entity use code, and then click OK.

    NAV2013_EditEntityUserCode2.png