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Set up AvaTax Connector for QuickBooks Online for your tax calculation needs

We’ve outlined the steps for you to connect and manage AvaTax Connector for QuickBooks Online to get started.  

Before you begin 

  • You have purchased AvaTax for QuickBooks Online.
    To purchase, log into AvaTax > Settings > Integrations > All integrations > search for QuickBooks Online > select Get Started > select Get integration.

  • You must be an AvaTax administrator to connect QuickBooks Online to AvaTax. 

  • You must have admin access to your QuickBooks Online account. 

Step 1: Install AvaTax Connector for QuickBooks Online

Install the AvaTax Connector for QuickBooks Online to establish the connection between AvaTax and QuickBooks Online.

Steps

  1. Sign in to QuickBooks Online, and go to Apps.
  2. On the Find Apps page, type 'avalara' in the search box.
    The Avalara AvaTax appears in the search list.

    searchapp.png
  3. Select Avalara AvaTax to open app overview.
  4. On the Overview page, select Get app now.
    Getappnow.png
  5. On the Avalara-QBO connect page, read the instructions, and select Connect

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    Note

    By selecting Connect, you give AvaTax permission to access the information in your QuickBooks Online account.


    Connect_page.png

    The Avalara AvaTax for QuickBooks Online page displays.

Step 2: Connect QuickBooks Online and Avalara AvaTax 

The next step is to connect QuickBooks Online and AvaTax to enable the flow of transactions to AvaTax. 

Steps

  1. On the Avalara AvaTax for QuickBooks Online page, select AvaTax Signin.
  2. Enter your AvaTax username password and select Sign in.

    AvaTax_password_signin.png

    The Manage your Integration page displays.

    manage_integration.png
  3. On the Manage your integration page, select AvaTax connector Settings. 
    The QuickBooks Online Connector Settings displays.

    QB_Conn_settings_full.png
  4. From Avalara Company, select the AvaTax company you want to link to AvaTax.
  5. Under the Integration Settings, select appropriate values: 
     
    SERVICES Address Validation is selected by default. We recommend you to uncheck this option.
    Leave this selected unless you don't want AvaTax to validate addresses. AvaTax validates addresses for customer records created in the previous 30 days.
    CALCULATE TAX FOR Select whether to send exempt customer transactions to AvaTax for tax calculation:
    • All Customers is selected by default. We recommend you to keep this option selected..
      When selected, QuickBooks Online sends all transactions to AvaTax for tax calculation. AvaTax exempts customers designated as exempt.
    • Only Taxable Customers if you want QuickBooks Online to send transactions of taxable customers only. No exempt customer transactions are sent to AvaTax.
    SALES TAX ITEM Sales Tax is selected as the sales tax item and cannot be changed.
  6. Select Save. A message confirms that your settings are saved.
  7. Select back
  8. Select Go back to QuickBooks to return to QuickBooks Online.

QuickBooks Online is now connected to AvaTax and ready to send transactions for tax calculation. To further customize the way QuickBooks Online interacts with AvaTax, see Update AvaTax settings for QuickBooks Online.

Step 3: Set up AvaTax tax rate

Follow the steps to ensure that the tax is not calculated twice.  

Steps

  1. In QuickBooks Online, go to Taxes.
  2. Select Sales tax settings.
    sales_tax_settings.png
  3. Under the Edit settings page, in the Custom rates section, select Add rate.
    Addrate.png
  4. On the Add a custom sales tax rate page, specify the following values:
    addcustomtaxrate.png
    Single or Combined Select Single.
    Name Enter 'AvaTax' in the Name field.
    Agency Choose any (home jurisdiction is fine)
    Rate 0.00%
  5. Select Save

Update tax rate for customer

Steps

  1. Go to QuickBooks Online > Customers.
  2. Select a customer.
  3. Select Edit.
    The Customer information page displays.
    Custom_infocustom_rate.png  
  4. On the Customer information page, under the Tax info tab, select a tax rate for the customer.

This will default the native QuickBooks calculation for the customer to 0% thus ensuring that tax is not duplicated. 

Step 4: Manage taxability of products and services

After you connect your business application to AvaTax, you may want to further adjust the settings depending on the products and services you sell and whether you have exempt customers.

Map the items you sell to Avalara tax codes 

Map the items you sell to Avalara tax codes so that AvaTax calculates the most accurate sales tax rate for your customers. If you don't assign tax codes, all products and services are taxed at the standard rate for each jurisdiction. 

Before you begin 

  • If a product or service is not mapped in AvaTax, it will process as Tangible Personal Property, which is taxable in all jurisdictions. This is valid unless the product or service is specifically marked as non-taxable in QuickBooks Online. 
  • All items mapped to an Avalara Tax Code will be taxed based on the product or service taxability in the specific jurisdiction according to the mapping selected. 

Steps

  1. In AvaTax, go to Settings > What you sell
  2. Click Add an item
  3. Enter an item code and description. 
    The item code must match the name of the product, service, or charge as it is recorded in your business application. 
  4. Select the Avalara tax code that best fits your item. 
    A list of codes displays when you start typing. 
  5. If you can't find the code you're looking for, scroll down to the end of the list and click Browse the directory. Or, create a custom tax code.  
  6. Select one of the following options:
    • Save: If you use AvaTax to calculate sales and use tax, VAT, or GST, select Save when you're done.
    • Save and get attributes: If you use AvaTax to calculate other types of taxes or fees, select Save and Get Attributes.
      If additional attributes are required for accurate tax calculation, they appear under the Define Product Attributes section.
      1. Enter the required information for each attribute.
        Refer to this guide for more information about the attribute options.
      2. Select Save when you're done.
  7. Repeat steps 3-6 if you have more than one item to map.  

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Note

  • If the taxability of a product or service is not explicitly selected in QuickBooks Online, a product or service that is not mapped may be treated as Non-Taxable. To ensure that your products or services are taxed appropriately, make sure to update the taxability of the product or service in QuickBooks Online.  To update the taxability, login to QuickBooks Online > Settings > Product & services > Edit > Edit sales tax > select Still don’t see what you’re looking for?, select Taxable or Non-Taxable.   
    Taxable_nontaxable.png

  • If you plan to participate in the Streamline Sales Tax (SST) program, all products or services must be taxable or mapped to an Avalara Tax Code.  Marking an unmapped product or service as Non-Taxable in QuickBooks Online is not allowed through SST. 

Exempt customers from tax 

If you regularly sell to tax-exempt customers—such as government agencies or non-profit organizations—you need to do two things:  

  • Indicate customer purchases are exempt so customers aren't charged sales tax.  
  • Decide how to organize and store valid customer exemption certificates and invoices in case your company is audited. 

Steps

  1. In QuickBooks Online, navigate to the customer record.  
  2. Select Edit.
    Edit Customer.png
  3. On the Customer information page, select the Tax info tab.
    Tax Info Tab.png
  4. In the Exemption Details field, enter a value for exemption. If no value is added to this field, the customer will not be processed as exempt. 
  5. Select Save

You can also exempt the customer in AvaTax or in Avalara CertCapture. To exempt the customer in AvaTax, go to AvaTax > Exemptions > Get Set Up.

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Note

If you plan to participate in the SST program, you are required to use the Avalara Exemption Certificate Management system or CertCapture. 

Step 5: Update AvaTax settings for QuickBooks Online

AvaTax for QuickBooks Online works with the suggested default settings, but you can update them to meet your company's business needs. The Manage your integration page enables you to customize the way QuickBooks Online interacts with AvaTax. 

Manage your integration settings

Steps

  1. In QuickBooks Online, go to Apps.
  2. Click the My Apps tab.
  3. Scroll the page to locate Avalara AvaTax, and then click Launch next to it.
    Avalara's sign-in page is displayed in a new tab.
  4. Sign in by using your Avalara credentials.
    Avalara AvaTax for QuickBooks Online's Manage your integration page is displayed.

    manage_integration.png

Enable/disable tax reconciliation (Calculation active check box)

Steps

  1. On the Manage your integration page:
  • Check Calculation active option to enable AvaTax for tax calculation and reconciliation.
  • Clear the check box If you want to disable tax calculation and reconciliation.

AvaTax connector settings

Steps

  1. Launch Avalara AvaTax to open the AvaTax for QuickBooks Online home page.
  2. Select AvaTax connector settings.
  3. Under Avalara account, specify the following values:
    QB_Conn_settings1.png
     
    Account ID Your AvaTax account number (Un-editable).
    Avalara Username The username you use to log in to AvaTax (Un-editable).
    Avalara Company Select the AvaTax company you want to link to AvaTax.
    List of companies you have linked to AvaTax, which are associated with the current Account ID. All transactions done in QuickBooks Online will be recorded against this company.
    Avalara Company Code The company code for the selected Avalara Company is displayed.
    Schedule Start Date for AvaTax Calculation Enter a date to schedule a start date for tax calculation and reconciliation. Transactions before this date are not considered for tax calculation and reconciliation.
    Do not enter any date if you want that all transactions, irrespective of date, should be considered for tax calculation and reconciliation.
  4. Under Integration Settings, specify the following values:
    QB_Conn_settings2.png

    SERVICES Address Validation is selected by default. Select to enable address validation.
    • If enabled, AvaTax validates the customer address in QuickBooks Online when creating a customer.
    • If disabled, AvaTax uses the customer's ship-to address to calculate the correct sales tax. 

    CALCULATE TAX FOR Select whether to send exempt customer transactions to AvaTax for tax calculation:
    • All Customers is selected by default. We recommend you to keep this option selected.
      When selected, QuickBooks Online sends all transactions to AvaTax for tax calculation. AvaTax exempts customers designated as exempt. 
    • Only Taxable Customers if you want QuickBooks Online to send transactions of taxable customers only. No exempt customer transactions are sent to AvaTax.
    SALES TAX ITEM Sales Tax is selected as the sales tax item and cannot be changed. A tax item created by AvaTax to mark customers as taxable. Select the Tax Product/Item Name mapped with Sales Tax Payable sub-account in QuickBooks Online.

Manage where you collect tax

As an online seller, you have to collect sales tax from customers in those states where you have sales tax nexus. AvaTax uses certain criteria to suggest states where you may need to collect tax.

Steps

  1. On the Manage your integration page, select Manage where you collect tax.

    The Where you collect tax! page displays various regions.
     
    manage_collect_tax.png
  2. You're automatically set up to collect tax in those regions which are already marked selected.
  3. Add more regions based on your company's needs.

Recalculate tax using the Reconciliation Utility

Sometimes the values of calculated taxes displayed in AvaTax may not match with those in QuickBooks Online. You can recalculate taxes to fix such instances by using the Reconciliation utility.

Steps

  1. On the Manage your integration page, select Reconciliation utility.
    The Tax reconciliation utility page displays.

    reconciliation utility.png
  2. Filter transaction for a window of maximum 90 days, and then click Search.
  3. Under Results, view the number of inconsistent, consistent, and total transactions.

    The taxes recorded in QuickBooks Online and AvaTax are displayed for all invoices in the table.
  4. If there are any inconsistent transactions, select them from the table and then click Recalculate Tax.

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Note

  1. The Recalculate tax feature will not update the record if there is an error on the invoice or sales receipt. If the Recalculate Tax feature does not work, go to the invoice or sales receipt, click on Estimate Tax, view the AvaTax Error, and resolve the error. The invoice will update upon Save once the error is corrected. 

  1. Invoices with tax disparities indicate that AvaTax and QuickBooks are not reconciled. A tax recalculation needs to be performed to ensure QuickBooks and AvaTax reconcile.

Disconnect Avalara AvaTax 

Steps

  1. Launch Avalara AvaTax to open the AvaTax for QuickBooks Online home page.
  2. Click Disconnect Avalara AvaTax.
    Your QuickBooks Online service gets disconnected from your AvaTax account.
 

Step 6: Send a test transaction from your business application

After you connect your application to AvaTax, send a few test transactions to make sure the connection is working and to verify different business scenarios and workflows.

  1. In your business application, create and commit a transaction or an invoice.
    The transaction must be committed for AvaTax to calculate tax. If your application allows it, add a prefix to the document code on the test transaction so you can easily identify the transaction and void it later on. 

    Tip icon

    Tip

    We recommend testing common workflows and billing scenarios including quotes, return invoices, or credit memos.

    Here are some things you might want to include in a test transaction:

    • Addresses in jurisdictions where you collect and pay tax
    • Products and services mapped to Avalara tax codes
    • Shipping fees included in a freight line
    • Tax-exempt customers, if any
  2. Once the transaction is posted to AvaTax, sign in to AvaTax and go to Transactions to review the transaction. If the test transaction doesn't show up in AvaTax or look as you expect, try these things:
    • Make sure the account ID, license key, and company code in AvaTax match the ID, key, and code in your business application.
    • Create another test transaction and turn off any plugins or customizations to your business application. Sometimes these additions interfere with the connection to AvaTax.
  3. Change your settings as needed.
  4. Once you're satisfied with the AvaTax results, void the transaction in your business application and in AvaTax to make sure it isn't included in your tax returns.

Frequently asked questions