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Avalara tax codes

This article applies to:Avalara AvaTax Update

Avalara uses tax codes to identify products that have specific tax rates depending on where they are taxed. Using Avalara tax codes makes tax calculation easy for your company because Avalara keeps track of rate changes for products that have tax codes.

Anatomy of an Avalara tax code

Most Avalara tax codes are made up of eight characters: two letters to start and six numbers at the end.

  • The first letter indicates the tax code type (P for products, D for digital, Fr for freight, S for services, O for other).
  • The second letter indicates the tax code category (for example, C for clothing).
  • The six numbers indicate subcategories under the tax code category.

Examples

  • PC040101: Aprons
  • PC040105: Bandanas
  • PC040111: Coats and jackets

Exceptions

There are some exceptions to the way most Avalara tax codes are laid out.

Header Codes

Header codes are used for tax code categories and end in a series of zeros (for example, DC010000 or PC040000).

A header code can be used as a generic code when you can't find a subcategory that fits your product. Be careful when choosing to use a header code. The rules associated with them are meant to cover as many items in that category as possible, and the tax rate may not be accurate for your product.

You might consider using header codes in these scenarios

  • You can't find an appropriate tax code underneath a header code.
  • You use one SKU for items that would connect to different tax codes (i.e. software that's delivered both physically and electronically).

Two-character codes

FR and NT were created because some business applications can't handle eight-character codes for freight and item taxability.

  • FR is used for freight and is equivalent to FR020100 (Shipping only - common carrier - FOB destination)
  • NT is used for items that aren't taxable anywhere in the U.S.

P0000000 and U0000000

P0000000 and U0000000 are generic codes that are used when you have items that aren't mapped to an Avalara tax code. These tax codes are taxed at the full rate. If you have items that use P0000000 or U0000000, map them to an Avalara tax code so they're taxed at the most up-to-date rate.

  • P0000000 is used as a stand-in tax code for items that aren't mapped to an Avalara tax code.
  • U0000000 is used as a stand-in tax code for items that don't have a code in your business application.
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