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Avalara Help Center

How does Avalara calculate VAT or International tax?

Overview

You want to know how Avalara calculates VAT (Value Added Tax) for international sales.

Environment

Avalara AvaTax

Resolution

  • We calculate VAT (and other international tax) using the:
    • Addresses provided on the sale to determine location
      • We apply tax in those locations based on where you have told us to collect tax in your company Nexus
    • Tax codes assigned to your items (or sent with the item) to determine taxability of the items
    • Customer specific settings based on the exemptions applied to the transaction or set up for the customer record
  • For VAT we also consider Buyer's VAT Number and Place of Supply (To learn about settings for Place of Supply, Importer of Record and Permanent Establishment, see Manage Place of Supply Settings.)

NOTE: On January 23, 2018, AvaTax was enhanced to better support cross-border calculations and VAT by allowing the you to manage more complex nexus configuration options. If you were live on AvaTax calculating VAT on or before January 23, 2018, we made the following changes to your AvaTax setting for Seller is Importer of Record:

If you are a customer whose global transactions always include the United States or Canada in the Origin or Destination, in your nexus configuration for Seller is Importer of Record:

  • The Importer or Record (IOR) nexus default was set to True.
  • The goal of this setting is to maintain consistent tax results for you.  Setting the IOR to true will always trigger tax calculation in the destination country. In most cases previously, this approach is how AvaTax calculated.   

If you are a customer whose global transactions do not include the United States or Canada in the Origin or Destination, in your nexus configuration for Seller is Importer of Record:

  • The Importer of Record (IOR) nexus default will be set to False. We expect that your cross-border business model is more advanced and will want to leverage these new capabilities.

 

 

 

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