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How do I make a transaction exempt in Canada?

Overview

You want a transaction with a destination address in Canada to show as being fully exempt.

Environment

Avalara AvaTax

Resolution

  • You have a few options to make the sale exempt:
    • Use entity use code C on your transaction (It is exempt everywhere in Canada)
    • Create an exemption for the customer, using the Tribal exemption reason (entity use code C)
    • Create a Product Taxability Tax Rule making the tax codes of the products non-taxable in Canada and the province,
      • This processes the sale as non-taxable, rather than a sale to an exempt customer
    • Create an Exempt Entity Tax Rule making the Entity Use Code of your choice tax exempt in Canada and the province

 

Note: We recommend processing a sale as exempt only if you are comfortable providing proof of exemption, etc. in case of audit.