Configure Avalara for tax calculation in your marketplace

Avalara’s AvaTax is a cloud-based solution that automates transaction tax calculations and the tax filing process. Integrating Avalara ensures accurate tax calculations using tax content from more than 12,000 U.S. taxing jurisdictions and over 200 countries. It is ideal for marketplaces operating in the United States and Canada, where tax rules are complex and vary by ZIP code.

Pre-requisites for linking an existing account

Ensure that you have the following before configuring Avalara in your marketplace:

• Active Avalara AvaTax account
• Account credentials (Account number and License key)
• Company code from the admin console of your AvaTax account

Link an existing AvaTax account to your marketplace

To link an existing AvaTax account,

1. Go to Marketplace > Settings > BILLING SETTINGS | Tax Settings.

2. Click Edit in the Marketplace Tax Strategy section.

3. In the Tax Strategy field, select Avalara.

4. Click the more options menu, and then click Link Account.

5. Enter the following details for your Avalara account:

   1. Email address - the email address used for creating your AvaTax account.
   2. License key - your AvaTax license key issued during account activation.
   3. Account ID - your Avalara account number issued during AvaTax account activation.
   4. Company code - select your company code.
   5. Select Sandbox or Production under Account Type. Choose Sandbox to use the AvaTax integration in a sandbox marketplace for testing. Choose Production for live marketplaces.

6. Enter your business address, and then click Link Account.

   

Configure tax codes for products

For accurate tax calculation, you must assign the appropriate tax codes to your products.

Refer to https://taxcode.avatax.avalara.com to find tax codes based on the products you sell. If you do not configure a tax code for your products, taxation will still occur. By default, the marketplace uses tax code SW054003 (the tax code for SaaS products) for all transactions.

To set up a tax code for a product,

1. Go to Manage > Marketplace > Products > Catalog | Production Catalog. The production catalog opens.
2. Click the gear icon next to the product that you want to configure, then click Edit Marketplace Settings. The ‘productName Settings page appears with General, Product, and Billing tabs.
3. Click the Billing tab.
4. In the Tax Code field, enter the AvaTax tax code for the product.
5. Click Save.

Configure tax exemption

To configure tax exemption,

1. Go to Manage > Marketplace > Dashboard >Home | Companies.

2. Click on the Settings tab and complete billing information if needed for taxation.

3. In the Tax Identification Number field, enter the tax exemption number.

4. In the Tax Exemption field, select the tax exempt category.

   

How does the AvaTax integration work in a marketplace?

Once configured, the AvaTax integration works as follows:

During checkout: When a customer makes a purchase, the system sends transaction details to Avalara, including:

• Customer location (address)
• Product information and tax codes
• Transaction amount
• Any applicable exemptions

Avalara calculates the appropriate tax based on:

• The customer’s precise location (down to the ZIP+4 level)
• The specific tax rules for that jurisdiction
• The taxability of the products being purchased
• Any applicable exemptions

The calculated tax is applied to the order and reflected in the invoice generated by the purchase. For reporting, tax information is stored with the order and invoice. Reports such as the Order Details, Payment Details, and Invoice Details reports will include tax line information.