Online Integration with Avalara AvaTax

If your company sells multiple types of products in many tax jurisdictions, configuring tax calculation and reporting in MYOB Acumatica and maintaining up-to-date rates for all the taxes may require too much work and time. In this case, you might consider integrating with the AvaTax service by Avalara and then processing sales and use taxes online by using AvaTax. Because MYOB Acumatica provides built-in support for online integration with AvaTax, you can easily set up this integration.

The integration involves tasks that should be performed on both sides: in MYOB Acumatica and in Avalara AvaTax.

Account Configuration on the Avalara Website

You can configure the integration with the AvaTax service as soon as you have the following: a subscription to the AvaTax service (http://www.avalara.com), the license key and password to your organization's account in AvaTax, and the credentials (user name and password) to the AvaTax admin console.

In your AvaTax account, you should configure the company structure that corresponds to the structure of branches in MYOB Acumatica, and configure the tax profile for each company in AvaTax (which corresponds to each MYOB Acumatica branch).

For more information, see To Configure Your AvaTax Account.

Setup of Integration with AvaTax in MYOB Acumatica

To set up the integration with the AvaTax service in MYOB Acumatica, you should perform the following general tasks:

1. Setting up the connection between your MYOB Acumatica and AvaTax account. You also map each MYOB Acumatica branch to the corresponding company that you have created in the AvaTax account for that branch.
2. Setting up address verification. AvaTax uses address verification to determine the correct tax jurisdictions.
3. Creating a dedicated tax agency account for use with AvaTax.
4. Creating a tax zone associated with the tax agency you have created.
5. Setting up the AvaTax tax codes (AvaTax uses hundreds of tax codes for products and services that are sold in the United States) as tax categories in one of the following ways:
   • If your company's stock list includes many types of products, you can define all these tax codes as tax categories in MYOB Acumatica by creating a tax category for each tax code. In this case, consider importing the needed tax codes by using an import scenario, which you can create on the Import Scenarios (SM206025) form.
   • If your company's stock list is small, use only the codes that apply to your company's products by creating the appropriate tax categories manually by using the Tax Categories (TX205500) form.
   • If it is sufficient for your company to use the default tax category, create one tax category (for example, you can name it Taxable) by using the Tax Categories (TX205500) form. In this case, you should create the corresponding tax code in your Avalara AvaTax account to associate it with the default tax category in MYOB Acumatica.
6. Configuring customers by specifying the Avalara tax zone for each required customer as the default tax zone. For each customer location with an effective tax exemption certificate, you should specify the number of this certificate and the default entity use code that provides the reasons for exemption.
7. Configuring stock items and non-stock items by assigning them a special tax category that corresponds to the appropriate AvaTax tax code.

   If you are going to import stock item records from the source application you used before MYOB Acumatica, consider adding to your import scenario the steps for assigning tax categories to the items.

   Tip: To facilitate assigning tax categories to stock items, you can use item classes, which are defined on the Item Classes (IN201000) form. Item classes provide settings for similar products, and most items in the class have the same tax category. Once you assign a tax category to an item class, all items (of this class) that you create later will have this tax category and other class settings by default.

For instructions on configuring the integration with AvaTax, see To Set Up Integration With AvaTax.

Document Processing

Once integration with AvaTax is configured and activated, documents are processed as follows:

• Individually, in real time, by using the Invoices and Memos (AR301000) and Invoices (SO303000) forms. Taxes are not calculated for invoices on the Invoices form with the On Hold status. Once a user takes a sales order or an invoice off hold, the system checks whether the customer location specified on the document is in the special (AVALARA) tax zone. If so, the system sends a request to AvaTax for processing the document. AvaTax determines the applicable taxes based on the customer location address, entity code, available exemption certificates, and tax rules (if any), and computes the tax amounts. AvaTax shows the tax IDs and tax amounts of the applicable taxes on the processed documents.
• In bulk, on schedule, by using the Calculate Taxes (AP501600), Calculate Taxes (CA501600), or Calculate Taxes (AR501600) forms. Each of these forms displays the documents (of particular types) for which taxes have not been calculated (for example, if the connection was not available). AvaTax processes the documents one by one, by calculating taxes and returning tax IDs and tax amounts. A user can initiate document processing manually or schedule it to be performed at night or any other convenient time.

An invoice is assigned the Incomplete status if any errors occur in the external tax calculation during invoice creation on the Invoices form and if any of the following conditions is met:

• The invoice has been prepared for multiple sales orders.
• The invoice has been prepared for multiple shipments.
• The invoice has been prepared for a shipment that has multiple sales orders.

If the invoice is assigned the Incomplete status, taxes are not calculated, and payments applied to related sales orders are not transferred from the orders to the invoice. For the invoice, only the Complete Processing command is available on the More menu. When you click Complete Processing, the system receives the external taxes and transfers payments from the related sales orders to the invoice if no errors occur during the processing by the external tax provider. After the processing, the invoice is assigned the next status in the invoice workflow.

On the Process Invoices and Memos (SO505000) form, the new Complete Processing action is available for selection in the Action box. If a user selects this action, the table displays all the invoices with the Incomplete status.

Avalara Tax Calculation in AR Invoices

For sales tax calculation of an AR invoice, MYOB Acumatica sends to Avalara the invoice amount and the information on two addresses used in Avalara: Address From and Address To.

Address From is generally the address of the branch specified for the invoice as a whole—the one specified in the Branch box on the Financial tab of the Invoices and Memos (AR301000) form. If the invoice has been created from a service order or an appointment, Address From is the address of the warehouse (if applicable) specified for the line item, or the branch location address of the service order (if no warehouse is applicable). This address does not affect the sales tax calculation but is required in the Avalara API.

For a document of the Credit Memo or Cash Return type, MYOB Acumatica sends the address of the customer's location as the Address From in the header and in document lines that have been directly entered.

Address To affects the tax calculation. In all existing versions of MYOB Acumatica, the system uses the following sources of the addresses to send to Avalara for tax calculation of a particular document.

If you need the system to use different logic in retrieving Address To for sales tax calculation in documents, you can override the appropriate method through customization of MYOB Acumatica.

Avalara Tax Calculation in AP Documents

Integration with Avalara supports use taxes in AP bills on the Bills and Adjustments (AP301000) form so that sales and use taxes can be identified. Also, the system provides a way to automatically calculate a use tax in an AP bill if no tax is included in the bill.

To allow the system to automatically calculate taxes in AP documents, on the Tax Zones (TX206000) form, you should specify whether to process the taxes returned from Avalara as sales taxes or as use taxes. In the Calculate in AP box, you select one of the following options:

• Use Taxes: The taxes in AP documents will be processed as use taxes. This is the default value for new tax zones.
• Sales Taxes: The taxes in AP documents will be processed as sales taxes.

On the Bills and Adjustments form, the processing of use taxes consists of the following steps:

1. You create an AP bill and in the Vendor Tax Zone box, you specify a tax zone that has Use Taxes selected in the Calculate in AP box on the Tax Zones form.
2. You save the AP bill.
3. The system sends a tax request to Avalara, and the use taxes are added to the Taxes tab of the Bills and Adjustments form for the bill. The system displays a warning near the Tax Total box in the Summary area that use taxes are excluded from Tax Total.
4. The automatically created use taxes also appear on the Taxes (TX205000) form.

The use taxes created on the Taxes form have the USE suffix in their tax ID and the Use option selected in the Tax Type box. Each new tax is created according to the following rules:

• If Use Taxes is selected in the Calculate in AP box for the tax zone on the Tax Zones form, a use tax is created. If Sales Taxes is selected in the Calculate in AP box, a sales tax is created.
• If an internal tax is created, when the Calculation Rule is set to Exclusive Document-Level, the system verifies that on the GL Accounts tab of the Taxes form, the following settings are specified:
  • Use Tax Expense Account: Selected
  • Tax Expense Account: Populated
  • Tax Expense Subaccount: Populated if subaccounts are used in the system
• The GL transaction posted to the general ledger as a result of processing use taxes debits the tax expense account and credits the accounts payable account with the amount specified in the Tax Amount column of the Taxes tab on the Bills and Adjustments form.
  Note: The bill reclassification process does not sent an updated information about the general ledger accounts to external tax provider. For more information, see Project Expense Reclassification: Limitations.

The following table lists the settings of a new use tax created by Avalara on the Taxes form.

Tax Reporting

By using the Post Taxes (TX501500) form, you can select the documents to be reflected on your tax reports. This form displays the list of released transactions for which AvaTax has calculated the taxes. You can post to your AvaTax account all the listed transactions or only those that you select, depending on the information you want AvaTax to use on the tax reports for your organization. Each posted document will have a copy in AvaTax. You can specify whether you want AvaTax to use the same sales accounts to store the transactions.

Support for Address Geolocation

Once the External Tax Calculation functionality has been configured, you can specify a particular customer location by entering either the postal code or the latitude and longitude coordinates to specify a particular customer location. If you provide both the postal address and the latitude and longitude coordinates, the AvaTax service specifies the tax jurisdiction based on the postal code. If the postal code is unknown, you can provide only the latitude and longitude coordinates, and the AvaTax service specifies the tax jurisdiction based on the provided coordinates. If the postal code and the latitude or longitude coordinate (or both coordinates) are missing, the AvaTax service cannot identify the tax jurisdiction, and the system displays an error message.

After an address with latitude and longitude coordinates is saved, the system copies these coordinates between the appropriate documents. For example, when you create an invoice based on a sales order, the system copies the address information, including the latitude and longitude coordinates, from the sales order to the invoice. You can override the copied coordinates if needed.

The following screenshot shows an invoice on the Invoices and Memos (AR301000) form with the latitude and longitude coordinates that have been defined for calculation of taxes.

The following screenshot demonstrates the calculation of an invoice's taxes on the Invoices and Memos form based on the defined latitude and longitude coordinates.

Reports and Forms that Use Latitude and Longitude Coordinates

The latitude and longitude coordinates are displayed on the reports that are generated on the following report forms:

• Invoice & Memo (SO643000)
• Invoice/Memo (AR641000)
• Service Order (FS641000)
• Appointment (FS642000)
• Sales Order (SO641010)
• Shipment Confirmation (SO642000)
• Appointments in Service Order (FS642500)

The following screenshot illustrates a report with the provided latitude and longitude coordinates on the Invoice/Memo (AR641000) report.

The Latitude and Longitude boxes have been added on the following forms.