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Exempt Customers from 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.
  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.


Add a customer record to CertCapture from Sage 500

  1. Go to AvaTax > Utility > Create Customer Record in Avalara CertCapture.

  2. In the Create Customer Record in Avalara CertCapture window: ​

    1. Select a customer.
    2. To add/select the customer's address, click Validate Address.
    3. Click Create Customer.  The message "The Customer record has been successfully created in CertCapture." is shown. Click OK.

  3. Click Close.

Request an exemption certificate

  1. Go to AvaTax > Utility > Initiate Exemption Certificate Request.
  2. In the Initiate Exemption Certificate Request window:

    1. Select a customer.
    2. To add/select the customer's address, click Validate Address.
    3. Go to the Send Method section, select one of the options to send the certificate request.    
    4. Add a custom message. This field is useful for communicating instructions when using the Communication mode as Fax
    5. Click Initiate Request.

      The message "The Exemption Certificate Workflow Request has been successfully generated. Tracking code is xxxx-xxxxxxx" is shown.

    6. Click OK.
  3. Click Close.

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 customers with exemption certificate number

To flag customers as exempt, follow these steps:

  1. In Accounts Receivable, click + next to Maintenance, and then click Maintain Customers.

    S500-Maintain Customers.png
  2. Open a customer record.
  3. Click Sales Tax Exemptions.

  4. In the AVATAX Tax Code of State field, type the exemption number.
  5. Click OK.

Assign an entity/use code

  1. In the AvaTax Task, click + next to Maintenance.

  2. Click Maintain Entity/Use Code Mapping.

  3. Next to the Customer ID field, click the Magnifying Glass, and click the Customer ID you wish to select.
  4. Next to the Address ID field, click the Magnifying Glass, and click the Address ID you wish to select.
  5. Next to the Entity/Use Code field, click the Magnifying Glass, and click the Entity/Use Code you wish to select.
  6. Click the green checkmark to save.