Setting up External Tax Calculation

FinancialForce Accounting can integrate with Avalara AvaTax to calculate tax on invoices and credit notes.

  • In companies where the record type is SUT, AvaTax can be used to calculate tax on sales invoices and sales credit notes.
  • In companies where the record type is Combined, GST, or VAT, AvaTax can be used to calculate tax on sales invoices, sales credit notes, payable invoices and payable credit notes.

The following setup must be completed in order for FinancialForce Accounting companies to integrate successfully with the external system. When this setup is complete, you can calculate tax values for invoices and credit notes. You can post those documents so that they are "Complete" in FinancialForce Accounting and their tax values are "Committed" in AvaTax. You are also able to validate addresses on SUT companies and on account records (see Validating Addresses for External Tax Calculation). You can validate addresses that are recognized by the US Postal Service.

Note:

The tax value calculated by AvaTax replaces any tax values calculated internally by FinancialForce Accounting, or entered manually by users.

Create a Tax Code for Use by AvaTax

Create a tax code that will be used to represent the summarized tax on an invoice line and give it a tax rate starting from the beginning of time. We recommend that you set this tax rate to zero because AvaTax will calculate the actual tax rate and tax value for each line. This tax code must be supplied when completing the External Tax Calculation Settings (below).

Complete the External Tax Calculation Settings

All customers who are new to Accounting in Summer 2022 or later use the Foundations external tax calculation processes by default. For more information about the Foundations processes, see Tax Calculation using Avalara AvaTax.

Customers who upgraded to Accounting Summer 2022 can use Foundations or Accounting processes to set up external tax calculation. The integration functionality between Accounting and Avalara AvaTax is the same, regardless of the setup process you use.

Tip:

We recommend that you use the Foundations processes to streamline setup tasks if you manage integrations between several FinancialForce applications and an external tax calculation service. For more information, see Upgrading to the Foundations Tax Connector.

You can refer to the existing details to manage external tax calculation settings using Accounting.

To complete external tax calculation setup in Accounting, ensure that you are logged in as system administrator then:

  1. Enable the External Tax Calculation Settings custom tab for the System Administrator. This custom tab is hidden on all profiles by default.
  2. Click the External Tax Calculation Settings tab.
  3. Select the Enable External Tax Calculation checkbox.
  4. [Optional] To restrict address validation to specific countries, enter a comma separated list of country codes in the Address Validation Country Code Filter. A company or account address will then only be validated if its country code matches one of the codes identified by this filter. If this field is left blank, addresses will be validated regardless of country code.
  5. Enter your account number, license key and URL as provided by Avalara. You must register the URL as a trusted remote site (Security Controls | Remote Site Settings).

    You must ensure that your AvaTax license includes all the international tax jurisdictions you require.

  6. Click Test Connection to verify that the connection to AvaTax is successful. If the test fails, double-check the account number, license key and connection URL.
  7. In Summary Tax Code, enter the tax code that was created for use by AvaTax (above). This must be a valid tax code.
  8. The Record Full Tax Details checkbox determines whether AvaTax returns line level tax details, or jurisdiction level tax details. For example, if a sales invoice line has three tax jurisdictions, when this checkbox is selected AvaTax will return three rows of tax details (one for each tax jurisdiction) whereas when this checkbox is deselected AvaTax will return one row of tax information for the whole line. See Recording Full Tax Details for more information. For VAT/GST companies, AvaTax always returns one row of tax information regardless of this setting.
  9. Click Save.

Configure Your FinancialForce Accounting Companies

There are two changes you need to make to a FinancialForce Accounting company to configure it to use AvaTax:

  • Set the company's External Tax Calculation option to Enabled.
  • Link the company to its corresponding company in AvaTax so that transactions committed in AvaTax can be reported correctly.

To do this:

  1. In FinancialForce Accounting, display the company detail page.
  2. Find the tax section and set the External Tax Calculation option to Enabled.
  3. In the External Tax Company Code field, enter the code used for this company in AvaTax. The code can be up to 50 characters.
  4. Click Save.

See Accounting Company Fields for information about other fields on the company detail page.

Link Your FinancialForce Accounting Products to Items or Tax Codes in AvaTax

If you want to use product-specific tax calculation, you can do either of the following:

  • Map each of your FinancialForce Accounting products to the appropriate tax code in AvaTax. To do this, display the product detail page and enter the AvaTax tax code in the External Tax Code field. The AvaTax tax code must, in turn, be linked to an AvaTax tax rule.
  • Map each of your FinancialForce Accounting products to its corresponding AvaTax item. To do this, the product code in FinancialForce Accounting must match the item code in AvaTax. The tax code associated with the AvaTax item is then used to calculate tax values for the product. This product to item mapping always takes precedence and will override any external tax code set on the product.

If you do neither of the above, AvaTax will calculate tax based solely on company and account addresses.

Add the Calculate Tax Button on Invoices and Credit Notes

If your users will be entering invoices and credit notes using Extended EditionClosed The view of the application that you see when you install one of the extension packages (such as the Cash Entry Extension package). For invoices, credit notes, and journals Extended Edition is integrated into the main package, but must be configured., you must complete the setup explained in Setting up Extended Edition for Sales Invoices and Sales Credit Notes and Setting up Extended Edition for Payable Invoices and Payable Credit Notes. The Calculate Tax button is included on the "extended"page layout for invoices and credit notes.

If your users will be entering invoices and credit notes using Classic EditionClosed The view of the application that you see when you first install the base managed package., ensure that they are aware that they must click the Edit button on their document before the Calculate Tax button becomes available.

For users using Lightning Experience, the Calculate Tax button is included on the Sales Invoice Detail page, Sales Credit Note Detail page, Payable Invoice Detail page and Payable Credit Note Detail page for invoices and credit notes, respectively.

Configure the Background Posting Scheduler

Make sure that the Background Posting Scheduler is set up to run at a suitable frequency. See Setting up the Background Posting Scheduler for details.

Exemption Certificates

If the AvaTax Exemption Certificate Management System (ECMS) is to be used, it must be enabled and all available certificates must be registered. If the ECMS is disabled, certificate numbers from FinancialForce Accounting will be taken on trust.

Note:

For one-time exemptions, users must populate the Customer Reference field on the sales document in FinancialForce Accounting. The value is passed to the Purchase Order No field in AvaTax when the document is posted.

Pass Account Name or Account Number to Avalara

The custom setting "Avalara Tax calls use account number"(Accounting Settings) determines whether the account name or account number is passed to the Cust/Vendor Code in Avalara. By default this custom setting is OFF meaning that account names are passed to Avalara.

If you want to pass account numbers instead, turn this custom setting ON and ensure that all account numbers are populated. Avalara will report an error if it is triggered when the account number is blank.