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Who You Exempt

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:

  • If you already have a method to store exemption certificates, send AvaTax your customers' exemption certificate numbers using your business application, or send us entity/use codes that explain why the customer should be exempt.
  • If you don't have a way to store certificates, use ECMS or CertCapture, depending on your needs:
    • To exempt buyers and store an image of their exemption certificates, use ECMS.
    • To exempt customers, and to request, generate, and store exemption certificates, use CertCapture.
You can exempt customers, but that doesn't mean you're compliant. You need valid documentation of your buyer's exemption certificate to support tax exemptions in case of an audit. Valid documentation includes copies of valid exemption certificates and the associated invoices. If you exempt customers from tax with exemption numbers or entity/use codes, keep organized records for all exempt purchases. Exemption Certificate Example - Thumb.png

Use CertCapture

CertCapture manages exemption certificates and other compliance documents. You can use it with or without AvaTax. Use CertCapture to:

  • Send mail or email campaigns to ask customers for certificates, and then track their progress
  • Keep your customers' exemption 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 official copies of exemption certificates for each customer. With CertCapture, you always have an organized, audit-ready database of exemption certificates. If you're using CertCapture to manage your exemption certificates, learn more about how it works.

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

Configure CertCapture in AvaTax

To configure CertCapture for an AvaTax account:

  1. In AvaTax, go to the Organization tab, and then select a company.
  2. On the Company page, on the Exemptions tab, click AvaTax Certs Company Settings.
  3. In the Edit: AvaTax Certs Company Settings window:
    1. Fill in required fields.
    2. From AvaTax Certs Status, select Enabled.
    3. Click Save.

Add a customer record to CertCapture from your accounting software

Add a customer's exemption certificate to CertCapture by adding a customer record to CertCapture.

To add a customer record to CertCapture from Microsoft Dynamics GP:

  1. Go to Cards > Sales > Customer.
  2. In the Customer Maintenance window, click Address.
  3. In the Customer Address Maintenance window, click Additional, and then click CertCapture Create Customer.
  4. In the Create Customer Record window:
    1. Type the required details for your customer, and then, to validate the address, click Validate.
    2. After receiving a message indicating the address is validated, go to the Create Customer tab. A pop-up that says "Customer successfully created" displayed.
    3. Click OK.

Request an exemption certificate

  1. Go to Cards > Sales > Customer.
  2. In the Customer Maintenance window, click Address.
  3. In the Customer Address Maintenance window, go to Additional and click Initiate Exemption Request.
  4. In the Exemption Certificate Request  window:
    1. Go to the Send Method section and select one of the options for communication. Click the link mentioned in the communication and complete the exemption certificate request process. 
    2. You can add a custom message. This field is useful for communicating instructions if you select the mode of communication as Fax.
    3. Click Send

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 exemption certificate number identifies a buyer as exempt. To exempt a customer, enter the buyer's exemption number on the invoice when making a sale.

AvaTax uses an entity/use code to exempt a customer from tax. An entity/use code works in two ways:

  • The code flags a transaction with a reason for the exemption based on the entity that's buying
  • The code flags a transaction based on how the buyer uses what they purchase

Entity/use codes are applied based on government laws. Use your business application to assign entity/use codes to your transactions.

Exempt customers from sales tax with an entity/use code

To assign an entity/use code to a customer in Microsoft Dynamics GP:

  1. Go to Cards > Sales > Customer.
  2. In the Customer Maintenance dialog box, click Address ID.
  3. In the Customer Address Maintenance dialog box, click Additional, and then click AvaTax Entity/Use Code.
  4. In the AvaTax Entity/Use Code dialog box, click Search .
  5. In the AvaTax Entity Code Lookup dialog box, select entity/use codes, click Select, and then click Save.
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