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Create a custom tax rule

This article applies to:Avalara AvaTax Update

Create a custom tax rule to override the way AvaTax calculates tax on your business's transactions.

A warning icon

Important: AvaTax doesn't keep custom tax rules up to date. You need to keep them up to date on your own.

 

Steps

  1. In AvaTax, Go to Settings > All AvaTax Settings.
  2. Next to Custom Rules, select Manage.
  3. Select Tax Rules and then select Add a Tax Rule.
  4. Enter the rule information on the New Custom Rule page.
    • Name
      Enter a descriptive name that makes the rule easy to find.
    • Effective date
      Select a date when the rule should start applying to your transactions. Also, select an expiration date if this rule should only be used for a certain period of time.
    • Rule type
      Select the type of custom rule you want to apply.
      • Taxability rule 
        Changes whether an item is or is not taxed within a specific jurisdiction.
      • Exempt entity rule
        Changes how a customer is taxed. This can be applied to a customer only or a combination of a customer and a tax code.
      • Rate override
        Changes the rate at which an item is taxed.
      • Base override
        Changes the amount of an item's price that is considered taxable. 
  5. Enter the taxability details under Applicability.
    Enter the information AvaTax should use when applying your tax rule, including which tax code the rule applies to. If your rule applies to a custom tax code, you need to create the code before creating a custom tax rule for it.
    Tip icon

    Custom tax rules can only be applied to one location at a time. Create a rule for each location where you want to apply the rule.

  6. Select the tax treatment details.
    Select the options AvaTax should use when applying your tax rule. These options are different depending on the type of rule you choose.
    • Taxability rule
      1. Select whether this rule makes an item taxable or non-taxable.
      2. Select the jurisdiction this rule applies to.
      3. Select whether the tax rate should be based on the ship-from address (origin), ship-to address (destination), or if AvaTax should decide (use system sourcing).
    • Exempt entity rule
      1. Select whether this rule makes the customer taxable or exempt.
      2. Select the jurisdiction this rule applies to.
    • Rate override
      1. Enter the rate you want to use.
      2. Select whether the rule includes special handling and enter either a cap or threshold value if your selection requires it.
      3. Select the jurisdiction this rule applies to.
    • Base override
      1. Enter the percentage of the item's price that you want to be taxable.
      2. Select the jurisdiction this rule applies to.
  7. Select Save Tax Rule.

Your new custom tax rule applies to your transactions going forward. You can apply your rule to past transactions by saving sale data again or recalculating the tax.

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