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Exempt Customers from Sales Tax

This article applies to:Avalara AvaTax for Open Cart

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 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 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).

Exempt a customer with an exemption certificate number

To exempt a customer in AvaTax for OpenCart, follow these steps:

  1. In the OpenCart administration panel, go to Total Customers > View More > Customers.
  2. Select the account that you want to exempt and click Edit.
  3. In the Edit Customer page, go to the General tab.
  4. For Tax Exempt, select Yes.
  5. Next to Tax exempt number, type the exemption certificate number. If this field is blank, the customer is still exempted and by default Tax Exempt is sent to AvaTax.
     

  6. In the Storefront, place the order. The order details now show that this order is exempt from tax. 
     

  7. In the AvaTax Admin Console, for this order, the Exemption Number displays the exemption details. This order is now exempt from tax.
     

Assign an entity/use code

For more information about available entity/use codes, see exemption reason matrices.  To exempt a customer from sales tax using entity/use codes, follow these steps:

  1. In the OpenCart administration panel, go to Total Customers > View More > Customers.
  2. Select the account that you want to exempt and click Edit.
  3. In the Edit Customer page, go to the General tab.
  4. Select the appropriate Tax Entity/Use Code.

  5. In the Storefront place the order. The order details now show that this order is exempt from tax.

  6. In the AvaTax Admin Console, for this order, the Entity Use Code displays the exemption details. This order is now exempt from tax.