AvaTax

This FAQ will go over the set up and usage of Avalara AvaTax in Paradigm, after an Avalara account has been set up. Paradigm’s sales tax calculations are fully bypassed by AvaTax.

Contact Paradigm support before setting this up, so that the necessary changes can be made.

Set Up Mode

Enabling set up mode allows for AvaTax configuration to be done without using AvaTax for tax calculations.

Sandbox Mode

This setting is for testing; any transactions sent to AvaTax will not be finalized, even if they are posted in Paradigm. This should only be enabled on the test database that Paragon support will set up after the initial set up is complete in set up mode on the main database.

Account Connection

1. Go to Paradigm > System > Company Preferences > Add-Ons.
2. Then fill in the Avalara AvaTax credentials:

• Account ID: Provided by Avalara
• License Key: Provided by Avalara
• Sandbox Credentials?: This setting is for testing and should only be checked if “Sandbox Credentials” are provided. When enabled, any transactions sent to AvaTax will not be committed, even if they are posted in Paradigm.
• Company Code: Click “Activate Connection” after filling in the account ID and license key, then select the company name from the dropdown.
  • This will normally be “DEFAULT”. Check the “Setup Mode” option before clicking “Activate AvaTax”, to avoid a premature activation of the AvaTax tax calculations.
• Setup Mode: Allows for AvaTax configuration to be done without using AvaTax for tax calculations.
  • Be sure that “Sandbox Credentials” is not checked when enabling testing mode.
• Document Recording: Allows documents to be marked as committed in AvaTax – this should be checked.
• Use Address Validation: Enables or disables the address validation feature (It is highly recommend that this is enabled).
• Enable Logging: Log detailed transaction activity. Only check this box if instructed to do so by support.
• Ensure that https://sandbox-rest.avatax.com/ and https://rest.avatax.com are available/whitelisted.

Sales Tax Code Configuration

If a tax code is not specified in any of the forms below, the default tax code “P0000000” will be used.

Company Preference

Go to System > Company Preferences > Add-Ons and select a tax code for the charges in the “Other” field in Paradigm (may vary based on how the company utilizes that field) and select a tax code for finance charges as well.

Warehouses

Go to Inventory > Inventory Settings > Warehouses and select a tax code for the warehouse.

Categories

Go to Inventory > Inventory Settings > Inventory Categories and select a tax code for each category.

Items

For items that need a different tax code then their parent category or aren’t in a category at all, open the item from Inventory > Inventory List, go to its detail tab, and select a tax code for that item.

Ship Vias

1. Go to System > Company Preferences dropdown > Ship Vias and select a tax code and entity use code for each ship via. These are the codes that will be used for the “Freight” field on the transaction when it is assigned to that ship via.

2. Set any pickup ship vias as “Pickup Only” – this will remove the ship to address from the transaction if the customer is picking up. 

3. Set any delivery ship vias as “Ship-To Address Required” – this will make it so orders must have a ship to address to be released, ensuring valid sales tax calculation for that address. 

GL Accounts

Go to General Ledger > Chart of Accounts and click the folder to the left of the line to set the tax code for that GL account. The most important code to set is the one for the gift card GL account, if gift cards are in use.

Address Validation

1. For tax to be calculated for an address, it must be validated by AvaTax. This can be done on individual transactions, the customer general tab, or on customer saved ship to addresses.
2. On a transaction, the ship to address will display a warning if the address isn’t validated. This warning symbol will also appear by the sales tax field in the transaction footer.

Coordinates and Inexact Addresses

1. Coordinates are accepted, but must be formatted correctly. Coordinate addresses override the ZIP code for tax calculation. Inexact addresses need at minimum a ZIP code to calculate estimated tax for the ship to address. A ZIP-code-only ship address will not validate, but will calculate estimated tax for that area.
2. If the ship to address is missing or isn’t validated, then the tax will be calculated as if the customer picked up from the “Ship From” warehouse (unless a ship to ZIP code has been provided, in which case estimated tax for that ZIP will be used).

General Usage

1. Sales tax is calculated during save, release, print, or post. It is also calculated automatically when leaving the freight calculation form. 
   • If the order has changed since the last tax calculation, the tax, total, and balance will be hidden until tax is recalculated.
   • If the tax hasn’t been calculated, a “Total (No Tax)” field will display that totals subtotal, freight, and other.

2. AvaTax returns a net tax amount, NOT a tax %. 
3. When the invoice posts, the sale is marked as committed in AvaTax and will be part of that period’s tax report.
   • Unposting an invoice will mark it uncommitted in AvaTax. If that period’s tax has been filed already, the invoice will not be able to be unposted.
   • The below error will be shown if an invoice is posted, unposted, voided, deleted, then the order is reconverted. This is caused by the invoice number being the same and Avalara has it marked as void already. To resolve this, void the invoice, leave it there, and convert the order again so a new SI2 number is used and then it will work as expected.
   • An unexpected error occurred. Below is attached error. AvaTax Error: DocStatus is invalid for this operation.

Tax Exempt Customers & Sales

1. A single transaction can be marked as nontaxable by assigning an entity use code on the advanced tab. This works to mark a transaction as taxable for a generally tax exempt customer as well. 

2. A customer or customer saved ship to address can be marked as nontaxable by assigning an entity use code as well, which will copy to all of that customer’s newly created transactions. 
3. If a customer saved ship to address has an entity use code, it will be brought into the transaction when selected. This also works for selecting previous orders from the ship ID dropdown.
4. Individual line items cannot be marked as taxable/nontaxable anymore – this is determined by the entity use code and item tax code.
5. In general, entirely tax-exempt customers should NOT be assigned an entity use code in Paradigm at the customer level. Instead, the customer should be marked tax exempt in AvaTax, along with the certificate information. This will cause tax to be applied in Paradigm if/when the certificate expires in AvaTax.

Returns

• The credit memo process in Paradigm doesn’t change. Selecting the original sale transaction on the credit memo is critical for ensuring that the tax refunded matches the tax originally collected.
  • Multiple invoices’ worth of returns can be processed on one credit memo, provided they are all linked to the original sales.
  • If a line cannot be linked to an original sale, make sure the ship to address matches what the original transaction had, and optionally change the “Tax Override Date” in the Credit Memo’s “Advanced” tab to calculate the tax as of the date of purchase instead of current date.

Offline Mode

1. If AvaTax is offline, the error shown above will appear: We were unable to connect to AvaTax. Please try again in a few minutes. The best practice is to minimize releasing, posting, etc as much as possible until the service is back online, ideally only posting invoices for counter customers.
2. If Paradigm detects the AvaTax service isn’t available or isn’t working, it will attempt to collect estimated tax when required (counter sales) or prompt tax to be calculated later (orders).

1. On an invoice, if the AvaTax service is offline, and the tax calculation for that invoice is out of date, and the user attempts to post the invoice or receive payment, Paradigm will offer an “Estimated tax” box for the user to fill in an estimated tax percentage to collect for that invoice.
2. On an order, if the AvaTax service is offline, no estimated tax is offered as the order is not a posting/committing transaction. The recommended approach is to wait until the service is back online, then update the order(s) and provide customers with the new totals.
   • Prepayments received on orders while AvaTax is offline will be automatically calculated as nontaxable. This prepayment amount can be manually edited by the salesperson if they want.
   • Address validation will not work while the AvaTax service is offline.
   • When the service resumes, the “Offline Invoice Reconciliation” should be run from System > Offline Invoice Reconciliation. This looks for invoices that didn’t have their tax amount validated by AvaTax and sends them to AvaTax along with the tax that was actually collected for those invoices. If any invoices that were posted during this time can be unposted and reposted before running the calculation (such as invoices for terms customers), tax calculation errors will be minimized.

Customer Portal

1. Tax will be calculated via AvaTax when the customer releases an order to their salesperson and only subtotals will be shown before releasing.
2. Warnings beside totals will display messages indicating that the total may not include the final tax calculation.

Reporting

1. Quote/Order/Invoice reports will need to be updated to show “Tax not Calculated” if tax isn’t valid.
2. Tax % display fields should be removed.
3. Sales tax report from Paradigm will no longer work – use reports in AvaTax.