Why does Avalara not recognize my items as tax exempt?

Several use cases require that items should be tax exempt, on both the purchasing and sales sides of the ledger. If you are using xTuple's integration with Avalara, then you may need to take extra steps to ensure that AvaTax recognizes your items as tax exempt.

For anyone using Avalara's CertCapture feature, you should read our knowledge base article on managing exemption overrides.

However, you may find other tax exemption scenarios which also require additional configuration. xTuple customers who register for Avalara's Streamlined Sales Tax (SST) feature, for example, have had to implement workarounds to prevent Avalara from recording tax. 

Here are several methods you can use to manage your tax exempt scenarios. Anyone enrolled in Avalara's SST feature may need these workarounds the most. But the methods could prove generally useful to others facing tax exemption conflicts—especially on the purchasing side, where tax exemption status impacts use tax reporting.

  1. Tax Types
    Create a tax type called "Non-taxable" and map it to the Avalara tax code ON030000 (Non-taxable fee). You can then apply this tax type at the purchase order line item level. With this in place, you should not see tax being calculated on the related voucher. This method should work for miscellaneous vouchers, as well.
  2. Item Overrides on Avalara Site
    The online AvaTax settings area contains a page for managing item taxability. On this page, you can identify individual items (i.e., purchased items) and link them to non-taxable codes. Like the method above, this workaround can be used to override the calculation of use tax for purchased items.

  3. Withdraw from SST Program
    If the SST program is causing you unwanted tax exempt conflicts, then you can choose to withdraw from the program.