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Why does my invoice not exempt even though there is an exemption number in the exemption field?

Overview

I have an invoice that I need to exempt the customer for. Even though there is something in the exemption number field, it still charges tax.

Environment

Avalara AvaTax

Resolution

  • If you have the ECMS set to required and the customer is not set up with a certificate on the exemptions page, then putting something in the exemption field will not work.

    • You would have to change the ECMS setting to optional, to be able to exempt tax with an exemption number only.

  • AvaTax assigns the Exemption No. field to Entity Use Code L)Other

    • In most jurisdictions this will be fully exempt, however Canada and Hawaii do not accept this as an exemption and fully tax L)Other

    • If the transaction is in Canada or Hawaii, you will need to create an Exempt Entity Tax Rule, making Entity Use Code L)Other exempt in Canada and/or Hawaii

      • In Canada, Entity Use Code  C)Tribal  is the only fully taxable exemption reason.

        • Another option is to send C)Tribal over on your transaction instead of (or in addition to) the exemption number

      • In Hawaii, Entity use Codes A) Federal Govt, B)State Govt, and D)Foreign Diplomat are the only fully exempt codes

        • Another option is to send A) Federal Govt, B)State Govt, and D)Foreign Diplomat over on your transaction instead of (or in addition to) the exemption number