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Exempt Customers from Sales Tax in Microsoft Dynamics 365 for Finance and Operations

There are several ways to exempt your customers from tax:

  • Use CertCapture
  • Add an exemption number to a customer record in Microsoft Dynamics 365 for Finance and Operations
  • Use AvaTax Exemptions
  • Map an entity/use code (exemption reason) to a customer in AvaTax Update for Microsoft Dynamics 365 for Finance and Operations

Exempt customers with CertCapture

After your company has integrated Microsoft Dynamics 365 for Finance and Operations and CertCapture, follow these steps to exempt customers. For more information about all things CertCapture, visit the guide.

Create a customer in CertCapture

  1. Go to Accounts receivable > Customers > All customers and select or create the customer you want to create in CertCapture.
  2. On the customer tab, go to CertCapture and select Create Customer Record.
  3. On the Create customer record in CertCapture page:
    1. On the Overview tab, select the customer address.
    2. On the Address tab, validate the address as needed.
    3. On the Contact information tab, type the contact details for your customer.
    4. Click Send. The message "Customer record has been successfully created in CertCapture" displays.

If you see an error message that says, "Please contact customer support to enable the service," contact support or your implementation specialist.

Initiate an exemption certificate request

  1. On a customer record, on the Customer tab, go to CertCapture and select Create Exemption Certificate (this does not create a certificate directly, but it initiates a request for a certificate).
  2. In the Exemption certificate request workflow window:
    1. To choose how to send a certificate request to a customer, in the Send Method section, select Email or Fax or Mail.
    2. Use the custom message field to communicate instructions if you send the exemption request via Fax.
    3. Click Send. The message "The Exemption Certificate Workflow Request has been successfully generated. Tracking code is - xxxx-xxxxxxx" is shown.

Retrieve certificate(s) request status

  1. On a customer record, on the Customer tab, go to CertCapture and select Retrieve Certificate(s) Status.
  2. On the Exemption Certificate Status page, review a list of exemption certificate requests and their request status.

    The Request stage can be either of the following options:

    • REQUESTINITIATED - You sent the email, fax, or letter to the customer.
    • CUSTOMERRESPONDED - The customer received an exemption certificate request and responded to it by entering the wizard (but didn't yet complete the certificate).
    • CERTIFICATERECEIVED - The customer has completed the certificate request. The certificate is in CertCapture and ready for validation.,

Retrieve certificate(s)

  1. On a customer record, on the customer tab, go to CertCapture and select Retrieve Certificate(s).
  2. On the Retrieve exemption certificate page:
    1. Go to the Certificate Details tab and select the certificate.
    2. To download the certificate, click the following buttons and follow the steps in your computer for downloading a document.
      • To download the certificate in PNG format, click Home > Certificates > Get Certificate as PNG.
      • To download the certificate in PDF format, click Home > Certificates > Get Certificate as PDF.
    3. Click Close.

Validate exemption certificates

Validate the exemption certificates you receive in CertCapture.

Exempt customers in Microsoft Dynamics 365 for Finance and Operations

Associate customers with exemption numbers so AvaTax Update knows which customers to exempt from tax.

Add an exemption number to a customer record in Microsoft Dynamics 365 for Finance and Operations

  1. In Microsoft Dynamics 365 for Finance and Operations, select the appropriate tax exempt number on a customer record.

AvaTax Update exempts all customers with an exemption number. If you're not using AvaTax Exemptions or CertCapture, AvaTax Update only exempts transactions. It doesn't keep record of your exempt customers.

Exempt customers using AvaTax Exemptions

If you only have a few exempt customers, the limited exemption product built in to AvaTax Update, AvaTax Exemptions, should meet your company's needs.

Use AvaTax Exemptions to exempt customers

  1. In AvaTax Update, set up AvaTax Exemptions.
  2. In Microsoft Dynamics 365 for Finance and Operations, make sure the customer number on your exempt customers' records matches the customer number you entered when you were creating the exemption in AvaTax Exemptions.

When Microsoft Dynamics 365 for Finance and Operations processes invoices, AvaTax Update checks the customer number to see if there's a record in AvaTax Exemptions and exempts customers as needed.

Map entity/use codes to customers

Entity/use codes are custom values that group similar customers for exemption purposes and link them to tax rules. AvaTax Update for Microsoft Dynamics 365 for Finance and Operations creates default entity/use codes automatically when it's installed. To apply entity/use codes in AvaTax Update for Microsoft Dynamics 365 for Finance and Operations, map entity/use codes to customers or transactions. For more information about available entity/use codes, see exemption reason matrices.

  • If you select a single address for a customer, only that address uses the entity/use code.
  • If you select an customer account and don't specify an address, all transactions for that customer use that entity/use code.
  • If you use CertCapture or AvaTax Exemptions, check your exemption certificate handling settings in the AvaTax Update advanced account settings.

Map an entity/use code to a customer

Map an entity/use code to a customer to exempt them on:

  • Sales quotes
  • Sales orders
  • Sales invoices
  • Free text invoices
  1. Go to Avalara AvaTax > Utilities > Entity \ Use Code Mapping.
  2. Click New.
  3. In the new line:
    1. Select Customer Account from the dropdown list.
    2. Select the name associated with the address from the Name or Description list.
    3. Select the Address.
    4. Select the Entity\Use Code you wish to apply.

Map an entity/use code to a customer project

Map an entity/use code to a project or customer to exempt a:

  • Project sales order
  • Project invoice
  • Project invoice proposal
  1. Go to Avalara AvaTax > Utilities > Project Entity \ Use Code Mapping.
  2. Click New.
  3. In the new line:
    1. Select Document Type from the dropdown list.
    2. Select the Project\Customer account.
    3. Select a Description.
    4. Select the Address.
    5. Select the Entity\Use Code you wish to apply.