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Exempt Customers from Tax

This article applies to:Avalara AvaTax for NetSuite

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.
  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 NetSuite

To add a customer record to CertCapture from NetSuite, follow these steps:

  1. In NetSuite, go to Lists > Relationships > Customers, and then click New Customer.
  2. On the Customer page, type the required details, and then click Save. A message displays after the customer record is added.
  3. On the Customer page:
    1. To add address details and an email address, click Edit.
    2. Click the Address tab and add or select the address for which you want to generate the exemption certificate.

      NS_Cetcapture8.png

    3. Click Add Customer to CertCaptureCertCapture. A message displays when the customer is added to CertCapture.

      NS_Cetcapture9.png

Request an exemption certificate

To request an exemption certificate from a customer in CertCapture from NetSuite, follow these steps:

  1. In NetSuite, go to Lists > Relationships > Customers, and then click Edit next to the customer from whom you'd like to request an exemption certificate.
  2. On the Customer page, click the Address tab:
    1. For Communication Mode, choose Email, and then 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.

      NS_Cetcapture10.png

      Email notification:

      NS_Cetcapture11.png

    2. To check the status of your certificate request, click Retrieve Certificate Status. The current stage of the request, displayed in the Request Stage, shows "Request Initiated".

      NS_Cetcapture12.png

      The Request Stage can be one of the following options:

      • Request Initiated: You've sent the email, fax, or letter to the customer

      • Customer Responded: The customer has received an exemption certificate request and has responded to it by entering the wizard, but they haven't faxed the certificate

      • Certificate Received: The customer has faxed the certificate to CertCapture

      The Request Status can be Open or Closed.

    3. Click Email to generate the exemption certificate. Once the Request Stage shows "Customer Responded," proceed with the next step.

      NS_Cetcapture13.png

    4. Click Email again to complete the generation of the exemption certificate.
    5. Click Retrieve Certificate(s) Status. Once the certificate is complete, the Request Stage shows "Certificate Received."

      NS_Cetcapture14.png

    6. Click Retrieve Certificate. Select the exemption certificate, and then click Get Certificate. Download the exemption certificate in either .PNG or .PDF format.

      NS_Cetcapture15.png

Use exemption certificate numbers or entity/use codes

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 NetSuite

  1. In NetSuite, go to Lists > Relationships > Customers, and then click Edit next to the customer for whom you'd like to add an exemption certificate number.
  2. Go to the AvaTax tab and type the Exemption Certificate No.

    NS_ExemptionNo.png

  3. Click Save.

Create an entity/use code

To create an entity/use code, follow these steps:

  1. In NetSuite, go to Avalara > Setup > Entity/Use Code.
  2. On the Entity/Use Code List page, click New.
  3. On the Entity/Use Code page, follow these steps:
    • In ENTITY/USE CODE ID, type the entity/use code (typically one letter).
    • In DESCRIPTION, type a description for the entity/use code.
  4. At the upper left, click Save.

Map an entity/use code to a customer

  1. In NetSuite, go to Lists > Relationships > Customers, and click Edit next to the customer to whom you'd like to map an entity/use code.
  2. On the Customer page, click the Address tab.
  3. Select an Entity/Use Code from the drop-down menu. If none exist, create a new one.
  4. Click Save.
    NetSuite2014_MapEntityUse2.png

Use a taxable checkbox

Use the Taxable checkbox in NetSuite to flag a customer as taxable. If you clear this checkbox, the customer is flagged as exempt from tax.

Flag customer as exempt in NetSuite

In AvaTax for NetSuite, configure tax calculations for a sales transaction that have the taxability at the header-level: 

  1. Go to Setup > Accounting > Set up Taxes. Click on United States and ensure that Per-Line Taxes on Transactions isn't enabled. If this option is enabled, the accounting tab isn't visible.

  2. In NetSuite, go to Transactions > Sales, and click Create Invoices.
  3. On the Invoice page:
    1. Select the Custom Form as Standard Product Invoice.
    2. Go to the Accounting tab and deselect Taxable. If this field isn't selected, then the customer is exempted from tax