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Create an advanced rule to exclude marketplace transactions

This article applies to:AvaTax

To get AvaTax to ignore tax calculations for online marketplaces, like Amazon, Etsy, and Ebay, that collect and pay taxes for you, you need to set up an advanced tax rule. Advanced tax rules let you automate the transactions as they come in so you don't have to adjust those transactions manually.

Tax is still calculated on these transactions, but the amount won't appear on your liability reports or your returns. Make sure that the rules you set up are targeting only your marketplace transactions. Rules that are too broad may lead to incorrect tax reporting on your returns.

Tip icon

If you're using Extractor to sync your marketplaces with our platform, you don't need to set up rules for those marketplaces. Extractor takes care of that for you.

Before you begin

Some business applications create marketplace locations in AvaTax for you. If yours doesn't, add a location for each marketplace to your company profile.

Check the specific marketplace facilitator laws in places where you're registered to collect and pay tax. In some U.S. states, such as Illinois, marketplaces only collect and pay taxes on behalf of remote sellers. If you have a physical location in one of those U.S. states then you should collect and pay taxes as normal.

Steps

  1. In AvaTax, go to Settings > All AvaTax Settings.
  2. Next to Custom Rules, select Manage.
  3. Select the Advanced Rules tab and then select Add an Advanced Rule.
  4. Enter the information for the rule.
    1. Give the rule a name that helps you remember why you made it.
    2. Select Marketplace for the rule type.
    3. Select the date you want the rule to take effect.
    4. Under When, enter your Field and Value selections. Customize your choices to match the marketplace transactions that are being sent to Avalara.
      1. For example, if a marketplace collects and pays for you only in specific states, and all marketplace transactions have a specific item code attached that indicates the product is being sold on the marketplace, target those fields:
        1. Under Field, for the first criteria, select ShiptoState.
        2. Under Value, enter the states where the marketplace collects and pays taxes for you. Enter common abbreviations as well as the full name of the state to ensure that the rule will catch all transactions in the state, no matter how they're formatted when they come into AvaTax.
        3. Select Add Criteria.
        4. For the second criteria, select ItemCode.
        5. Under Value, enter the code or codes that identify a marketplace transaction.
      2. Your own transactions may have different fields that can be used to track where they come from. Look at your transactions to identify useful fields.
    5. Under Then, select the name of the marketplace location you created from the dropdown.

      An example of advanced rule settings showing the Field section set to ShipToState, the Value section set to U.S. states, and the Then section set to a marketplace location.
       
  5. Select Save Advanced Transaction Rule.

    If you're making rules for more than one online marketplace, click on Add Rule Set and repeat steps 4-5 for your other marketplaces before saving.

AvaTax is set up to exclude transactions where the online marketplace collects and pays tax for you. We recommend testing your settings before using them on live transactions.

See also

Test your setup

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