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AvaTax settings for Microsoft Dynamics 365 Finance and Operations

AvaTax for Microsoft Dynamics 365 Finance and Operations works with the suggested default settings. But you can adjust them any time based on your company's business needs.

In Microsoft Dynamics 365 Finance and Operations, go to Modules > Avalara AvaTax > Setup > Set Up the AvaTax Connector and adjust the settings you want to change on each tab.

Connect to AvaTax

After you change information on the Connect to AvaTax tab, select Connect to AvaTax under Test Your Connection to confirm the information you entered is correct. If you make changes, you must supply the AvaTax license key to confirm your credentials.

Field Action
  • Account ID
  • License Key
View your account ID in AvaTax. Select Settings > All AvaTax settings. The account ID is listed at the top of the page. If you don't know your license key, get a new one.
Environment Select Edit Settings and then select the type of account you're connecting to in AvaTax.
Select Company Select the company you created in AvaTax that you want to associate with your company in Microsoft Dynamics 365 Finance and Operations.
Select Sales Tax Group Select the default sales tax group. Select AVATAX to use AvaTax for tax calculation. If you haven't mapped that sales tax group to the GL posting group, select Map to do so and then come back to this.

Sales Tax Settings

Section Field and Description
General Settings
  • Disable AvaTax Tax Calculation: If set to Yes, tax calculation is disabled and your company's business application no longer uses AvaTax to calculate tax on transactions.
  • Allow Tax Override: If set to Yes, you can override calculated tax at the transaction level.
  • Use Invoice Account for Tax Exemption: If set to Yes, when a customer is mapped to an invoice account with an exemption number, sales orders created for the company use the exemption number on the invoice account.
Customer Level Settings
  • Map Sales Tax Group: Select to open a utility to perform a mass updates of the sales tax group code on a range of existing customers. To update a group to use AvaTax to calculate tax:
    1. Select Map Sales Tax Group. The Tax Group pane opens.
    2. From Customer/Vendor, select Customer.
    3. From Sales Tax Group, select AVATAX.
    4. Select the first customer in the range from From and select the last customer in the range from To.
    5. Select Ok.
  • Map Entity/Use Codes to Customers: Set to Yes to map entity/use codes for your customer addresses to flag them as exempt from sales tax. When enabled, a button displays to open the page for doing that. Learn about other ways to manage customer exemptions.
  • Point of Order Acceptance Mapping: If set to yes, POA mapping is enabled. When enabled, a button displays to open the pane for entering the operating unit address to use for the POA.
Product/Item Level Settings
  • Map Avalara Tax Codes to Items: Recommended. Set to Yes to enable mapping items to Avalara tax codes to account for varying taxability of products and services. When enabled, a button displays to open the page for doing that.
  • Optional: Send Item GL Account Info to AvaTax: Set to Yes to send general ledger account information for an item to AvaTax. This information doesn't affect tax calculation.
  • Use UPC as Item Code: Set to Yes to send a UPC instead of an item code to AvaTax. Talk to your Account Manager about subscribing to this feature.
Freight/Shipping Level Settings
  • Map Freight/Shipping Codes to the Module: Set to Yes to enable the mapping of charges codes to Avalara tax codes. Available charges codes can be assigned to tax codes associated with freight or miscellaneous charges references. When enabled, a button displays to open the page for doing that.
  • Import Historic Mapping: If you’re updating from a previous version of Microsoft Dynamics AX or Microsoft Dynamics 365, click to import the mapping you had in those.

Address Validation

Section Field and Description
General Settings
  • Disable AvaTax Address Validation: If you disable address validation, AvaTax uses the customer's ship-to address as entered to calculate the correct sales tax. Sales tax might be calculated incorrectly if this option is disabled.
  • Return Validated Address in Uppercase: Set to Yes to save all address validation results in uppercase format, which is the preferred format of the U.S. Postal Service.
  • Validate Address Before Calculating Tax: Set to Yes to force an address validation of the sales/billing document prior to tax calculation. We don't recommend turning this on. It increases your usage significantly.
Select Countries for Performing Address Validation Select the countries for which AvaTax validates addresses. Address validation is available for the US and Canada. Accurate tax calculation starts with accurate addresses.
Other Settings Reset Addresses: Clears the Address Validated flag. Previously verified addresses are no longer recognized as validated.

Consumer Use Tax Settings

Section Field and Description
General Settings
  • AvaTax Use Tax Calculation (Recommended): If set to Yes, your business application uses AvaTax to calculate consumer use tax on vendor consumer use tax transactions.
  • Map Vendors to Assess Use Tax: Set to Yes to enable selecting a limited group of vendors for which consumer use tax assessed or who are excluded from assessment. When enabled, a button displays to open the page for selecting vendors. To select the vendors:
    1. Select Map Vendors. The Consumer Use Tax Mapping pane opens.
    2. Select the first vendor in the range from From Vendor and select the last vendor in the range from To Vendor.
    3. Select what action to perform on the selected vendors.
      • Enable - Enable use tax assessment for these vendors only.
      • Disable - Disable use tax assessment for these vendors.
    4. Select Ok.
Product/Item Level Settings
  • Apply Avalara Goods & Service Code Mapped on Item Group When It's not Available on an Item: If this is set to Yes and there isn't a tax code mapped to an item, but there is a tax code mapped to the item group, AvaTax will use the item group code for calculations. Recommended.
  • Apply Avalara Goods & Service Code Mapped on:
    • Item code: Applies the setting selected in Apply Avalara Goods & Service Code mapped on item group when it's not available on an item.
    • Procurement category: AvaTax uses the tax code from the procurement category.
Use Tax Posting Accounts
  • Select Use Tax GL Account: Select the ledger account to use for posting consumer use tax liability.
  • Use Tax Journal Name: Select the relevant name.
  • Select GL Account to Debit: Select a relevant account to post consumer use tax expenses to.
    • Single Account: Select to enable the list of accounts to choose from. You must select Single Account if you don't use items on vendor invoices.
    • Inventory Account: Select to use the inventory account associated with each item.
  • Single GL Debit Account: If GL Account to Debit is Single Account, select the relevant account.
Accrual Details
  • Auto Accrue Undercharged Tax:
    • No - When you post a transaction, messages display showing the difference between the tax the vendor charged and the tax AvaTax calculated. If the vendor charged less than the amount AvaTax calculated, and the amount is not within the threshold amount indicated in your settings, you decide whether to accrue that amount.
    • Yes - When you post a transaction, the amount outside the threshold indicated in your settings automatically accrues and posts to your general ledger.
  • Set Threshold Amount: Enter the dollar amount AvaTax uses to determine whether under-charged tax on a vendor invoice is of an amount significant enough to trigger accrual or the accrual message when posting transactions.

Project Module Tax Settings

Section Field and Description
General Settings
  • Select Project Invoice Address: Select the appropriate project address for your invoice.
  • Calculate Tax on Advance Payment Transactions: Set to Yes to calculate tax on advance payment transactions.
Map Entity/Use Code to Projects Map Entity/Use Codes to Projects: Set to Yes to enable mapping entity/use codes to projects. When enabled, a button displays to open the page for doing that.

Other

Section Field and Description
General Settings
  • Display Warning Messages for Tax Calculations: If set to No, you see only error messages.
  • Optional: Send Field to Avatax - 1: Select the type of data you want to send to AvaTax. This data doesn't affect tax calculation.
  • Optional: Send Field to Avatax - 2: Select the type of data you want to send to AvaTax. This data doesn't affect tax calculation.
Return Order Addresses

Select Return Order Address: Select the address you want to use for sales tax calculation of return orders and credit memos.

  • Bill To: Use the customer's primary address as the destination address for tax calculation.
  • Ship To: If the return order is created from a sales invoices, the delivery address on the sales invoice is used as the destination address for tax calculation. If the return order is not created from a sales invoice, the delivery address of the return order is used.
Misc Fee Posting Group Select Credit Account: Select the credit account to which miscellaneous fees should be posted.
Adapter Options
  • Request Timeout (In Minutes): We recommend that you don't adjust this setting. Enter the length of time to wait for AvaTax to respond to calculation requests.
  • Enable logging: We recommend that you don't adjust this setting. Enables client-side logging that's used primarily for troubleshooting issues. If you choose to enable logging, all success, warning, and error messages are included in the log.
  • Extensive logging: We recommend that you don't adjust this setting. Enables server logging that allows Avalara to be more proactive troubleshooting your issues.