Using Avalara tax provider

Preparing the tax provider interface implementation

As part of the data set up for the interface implementation:

1. Use the Country Set (tccom1680m000) session to specify a country set for the countries for which the tax provider must calculate the tax amounts and keep a sales-tax register. For orders with addresses in other countries, LN calculates the tax amounts.
2. Verify that the existing addresses in the countries specified in step 1, are in the format required by the tax provider. The city, state/province, and ZIP/Postal code for US and Canadian addresses must be specified in the correct address fields.
3. Install the tax provider using the instructions provided by the tax provider vendor.
4. Close the fiscal period using the Close Periods (tfgld1206m000) session.

Implementing the tax provider interface

To implement the tax provider interface:

1. Select the Use Tax Provider check box in the Tax Provider Parameters (tctax6100m000) session.
2. Specify these information:
   • User Name = Account Number (Provided by Avalara)
   • Password = License Key
   • Webservice URI = Service URL
3. Select the Interface (tax) provider. The tax provider must be AvaTax.
4. As soon as the parameters are saved an automatic ping is done. If the ping is successful, the version number is displayed, next to Interface Provider field.
5. Specify the countries to which the tax provider is applicable, in the Country Set (tccom1680m000) session. If the business partner's address is in one of these countries, LN does not calculate the tax amounts but transfer the tax data to the tax provider. For addresses in other countries, LN calculates the tax amounts.
6. Verify and assign GPS codes to the existing address using the Address Jurisdiction Verification Utility (tctax6210m000) session. These codes help to locate the address using Global Positioning System (GPS). However, the GPS codes are only used for addresses within the US. For addresses in other countries details such as street, city and state are used.
7. Specify your company, business partners (customers/vendors), and product-related data such as items in the tax provider. You can also link a specific AvaTax tax code to these items. You can also specify address in the tax provider.

   Note

   • The company specified in the tax provider must be same as specified in LN.
   • The business partner (customers/vendors), items and address information can be specified optionally in the tax provider.
8. Define the valid product categories in the Product Categories (tctax6101m000) session. These product categories are used to link AvaTax tax code to a specific transaction. The product categories that you define in LN must match the tax code defined in the tax provider.
9. Specify the matrix of item groups, items, contract types, service types, and ledger account numbers by product category, in the Product Category Tax Matrix (tctax6102m000) session.
10. Specify the Business Partners code in the Business Partners (tccom4500m000) session and share the same with AvaTax service.
11. Specify the transaction which are tax exempt. The Exempt Certificate number and Exempt Reason are defaulted for the Business Partner in the Tax Exceptions by Country Set (tctax1101m000) session.

    Note

    • The type of exemption for the transaction is identified in Avalara as Entity Use Code, which can be processed to Avalara as the Exempt Reason. However, the Reason Code defined in LN must be in the same predefined format as required in Avalara.

    Example

    • If a transaction is exempted as the transaction is performed for a charitable organization, in AvaTax Entity Use Code ‘E’ (Charitable/Exempt Org) must be used. In LN, you must make sure that the exempt reason ‘E’ is linked to the transaction.

Adjusting the tax provider interface setup

Consider making these adjustments, after you have implemented the tax provider interface,

• Simplify the tax code structure.
• Use separate tax codes for financial transactions.

Simplify the tax-code structure

If you have already used LN without a tax provider, consider to perform a reevaluation of your current tax structure in Financials. The tax provider does not require the complex tax handling implemented in LN for non-tax provider users. If you use a tax provider, LN uses the tax codes to determine the ledger accounts to which the various amounts are posted. LN sets all tax codes to singular tax during implementation of the tax provider interface. The tax provider determines the tax rates and the jurisdictions.