AvaTax

What is AvaTax?

Pelcro integrates with Avalara's AvaTax, a cloud-based sales tax automation software that calculates accurate taxes at checkout based on:

• Product taxability - Different products have different tax rules
• Customer location - Tax rates vary by jurisdiction (state, county, city)
• Your tax obligations - Where you have nexus determines where you collect taxes

Key Benefits

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Setup Requirements

Prerequisites

Before configuring AvaTax in Pelcro, you must:

1. Create an AvaTax account at Avalara's website
2. Configure your company in the Avalara portal
3. Set up nexus for states/countries where you have tax obligations
4. Assign tax codes to your products on Pelcro. To know which tax code to assign to your product, check here

Need help? Contact your Pelcro account manager for guidance or to connect with the AvaTax sales team.

Configuration Steps

1. Navigate to Settings → Integrations → Tax Management

2. Select AvaTax integration

3. Enter your AvaTax credentials: the Username and Password of an Avalara user. The user must already exist and hold company administrator privileges.

4. Select your Company from the dropdown

5. Configure your Origin Address (your business location for shipping/service)

6. Set the Functionalities:

   • Validate addresses: validates US and Canadian addresses and requires a postal code when an address is created. Strongly advised, since tax accuracy depends on it.
   • Prices include tax: when on, the prices you set already include tax, and AvaTax works the tax out of them instead of adding it on top.
   • Transport: who handles transportation of the goods (Seller, Buyer, ThirdPartyForSeller, ThirdPartyForBuyer or None). Used to determine VAT treatment on cross-border sales.
   • Delivery terms (Incoterms): EXW, FCA, CIP, CPT, DAP, DPU, DDP, FAS, FOB, CFR or CIF.
   • VAT positions: "We are the importer of record", "Goods sold are second hand" and "Customers are registered through a fiscal representative".

   Transport, delivery terms and VAT positions are reported on every transaction.

7. Choose whether to Record documents in AvaTax:

   • Enabled: Pelcro records the following in your AvaTax account for reporting:

     • Finalized subscription invoices, as committed sales
     • Refunds, as returns against the original sale: a full return when the whole payment is refunded, otherwise a proportional (percentage) return. Each refund is recorded as its own return, so an invoice refunded more than once has one return per refund.
     • Voided subscription invoices and subscription invoices marked as uncollectible, which void the original transaction

     Refunds are dated on the original invoice's date, so they're reported in that invoice's filing period.

   • Disabled: Tax rates are calculated but transactions are not recorded. Turn this off if another connector records documents for this company.

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How Tax Calculation Works

For AvaTax to calculate taxes on a subscription, ALL of the following must be true:

If any of these conditions is not met, taxes will not be applied.

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Understanding Tax Codes

Tax codes tell AvaTax how to classify your product for tax purposes. Different products are taxed differently depending on the jurisdiction.

Common Tax Codes

Important Notes on Tax Codes

• Tax codes determine taxability by jurisdiction - A product may be taxable in one state but not another
• Printed periodicals (PM codes) are often non-taxable in many US states
• Digital content has varying tax treatment across jurisdictions
• The wrong tax code can result in no taxes being collected even when required
• Bundled plans use each component's own tax code instead of the product's. See Bundled Plans below.
• Finding a code: use Tax code lookup on the AvaTax settings page to search Avalara's catalogue by code or description.

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Bundled Plans

A bundled plan is priced as a set of components (for example, a print edition and a digital edition sold together). Each component appears as its own line on the invoice, and AvaTax taxes each line separately.

• Each component carries its own tax code. AvaTax taxes the line at that code, so a print component and a digital component in the same bundle can be taxed at different rates.
• Fallback: a component without a tax code uses the product's tax code, and a product without one uses P0000000.
• Tax code required: when AvaTax is enabled, a bundled plan can't be saved unless every component has a tax code.
• Billing Engine only: bundled plans require Pelcro's Billing Engine. Accounts billing through Stripe can't use them.
• Checkout matches the invoice: the checkout preview uses the same per-component tax amounts as the invoice, so the tax the customer sees before purchase is the tax they are charged.

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Customer VAT ID

The customer's tax identification number is sent to AvaTax as their VAT ID. AvaTax uses it to zero-rate qualifying cross-border business sales.

• A customer marked as tax exempt is not sent a VAT ID.
• When AvaTax is enabled, a tax identification number longer than 25 characters is rejected when the customer is created or updated, because AvaTax would otherwise reject the whole transaction.
• Adding a VAT ID to an existing customer can change the tax on their next invoice.

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Invoices

VAT Reporting on the invoice page

The invoice details page shows a VAT Reporting panel with:

• The ship-from and ship-to country codes sent to AvaTax
• The legal texts printed on the invoice
• The invoice messaging AvaTax returned

Each line's VAT code is shown on that line in the line items table.

Applicable taxes on the invoice PDF

When an invoice's lines carry their own taxes, as a bundled plan's components do, the PDF adds an Applicable Tax(es) column listing each tax with its rate and amount.

VAT legal texts (German sellers)

When a German seller zero-rates a cross-border sale, the invoice footer states why no VAT was charged: reverse charge for services, intra-Community supply for goods within the EU, or export for goods outside it. A bundle of goods and services cites both.

• Invoices to customers in Germany, Austria and Switzerland carry the texts in German.
• The customer's shipping country is used before their billing country.

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Monitoring AvaTax

The AvaTax settings page links to three tools:

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Understanding Nexus

Nexus is the connection between your business and a tax jurisdiction that creates an obligation to collect and remit sales tax.

Types of Nexus

Nexus in Pelcro

• Nexus is configured in the Avalara portal, not in Pelcro
• Pelcro displays your configured nexus on the AvaTax settings page
• No nexus = No tax collection for that jurisdiction, regardless of other settings

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What's Supported

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Troubleshooting: Why Are Taxes Not Being Applied?

When taxes are not appearing on invoices, there are several common causes. Use this guide to diagnose the issue.

Quick Checklist

Before diving deeper, verify these basics:

• AvaTax integration is enabled in Pelcro settings
• AvaTax credentials are valid (API connection works)
• Origin address is configured
• Customer has a complete address (street, city, state, zip, country)
• Product has a tax code assigned

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Common Issue #1: No Nexus Configured

Symptom: Taxes show as $0.00, entire amount shows as "Exempt"

Cause: You don't have nexus configured in AvaTax for the customer's state/country.

How to verify:

• Check the AvaTax settings page in Pelcro - it displays your configured nexus jurisdictions
• Or log into Avalara Admin Console → Settings → Where you collect tax

Solution:

1. Determine if you have nexus in that jurisdiction (physical presence or economic nexus threshold met)
2. If yes, add the nexus in the Avalara portal
3. Nexus changes take effect immediately for new transactions

Example:

Customer address: Massachusetts, US
Your configured nexus: California, New York, Texas
Result: $0 tax because you don't collect tax in Massachusetts

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Common Issue #2: Product Tax Code Makes Item Non-Taxable

Symptom: Taxes show as $0.00, amount shows as "Non-Taxable" (not "Exempt")

Cause: The product's tax code classifies it as non-taxable in that jurisdiction.

How to verify:

• Check the product's tax code in Pelcro (Product settings)
• Research whether that tax code is taxable in the customer's state

Common scenarios:

Solution:

1. Verify the tax code is correct for your product type
2. If the product should be taxable, change to an appropriate tax code (e.g., P0000000 for general goods)
3. Consult with a tax advisor if unsure which code applies

Example:

Product: "Digital Magazine Subscription"
Tax Code: PM039397 (Periodicals)
Customer State: California
Result: $0 tax because printed periodicals are non-taxable in CA

Note: If this is actually digital content, it might need tax code DC010500 instead.

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Common Issue #3: Missing or Invalid Customer Address

Symptom: Tax calculation fails or returns $0

Cause: AvaTax requires a valid, complete address to determine the correct tax jurisdiction.

Required address fields:

• Street address (line 1)
• City
• State/Province
• Postal/ZIP code
• Country

Solution:

1. Ensure the customer has a complete address on file
2. Verify the address is valid (AvaTax validates addresses)
3. For US addresses, ensure the ZIP code matches the city/state

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Common Issue #4: Origin Address Not Configured

Symptom: AvaTax returns an error or $0 tax

Cause: AvaTax needs your business origin address to calculate taxes correctly (determines origin-based vs destination-based taxation).

Solution:

1. Go to Pelcro Settings → Integrations → AvaTax
2. Configure your company's origin address
3. This is typically your primary business location or fulfillment center

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Understanding "Exempt" vs "Non-Taxable"

These terms mean different things in AvaTax:

Why this matters: If you see "Exempt" and expect taxes, check nexus configuration. If you see "Non-Taxable," check the product's tax code.

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Frequently Asked Questions

General Questions

Q: Where do I configure nexus?

A: Nexus is configured in the Avalara Admin Console, not in Pelcro. Pelcro reads your nexus configuration from AvaTax and displays it on the settings page for reference.

Q: How quickly do changes in Avalara reflect in Pelcro?

A: Changes to nexus, tax codes, and other settings in the Avalara portal take effect immediately for new transactions. Existing invoices are not recalculated.

Q: Can I see what nexus is configured without logging into Avalara?

A: Yes, the AvaTax settings page in Pelcro displays a table of your configured nexus jurisdictions.

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Tax Calculation Questions

Q: Why is my customer being charged $0 tax when they should be taxed?

A: The most common causes are:

1. No nexus - You haven't configured nexus for their state in Avalara
2. Tax code - The product's tax code makes it non-taxable in their state
3. Missing address - Customer doesn't have a complete address

See the Troubleshooting section above for detailed diagnosis steps.

Q: My product is a digital subscription. Why isn't it being taxed?

A: Check the product's tax code. If it's set to PM039397 (Periodicals/Print Media), it may be treated as non-taxable. For digital content, consider using DC010500 or consult with your tax advisor for the correct code.

Q: The customer is in a state where I have nexus, but taxes still show $0. Why?

A: Even with nexus configured, the product's tax code determines taxability. For example:

• Printed periodicals are non-taxable in most states
• Certain digital goods have varying treatment
• Some products may be classified as exempt in specific states

Check the product's tax code and verify it's appropriate for your product type.

Q: What's the difference between "Exempt" and "Non-Taxable" in AvaTax?

A:

• Exempt means the item would normally be taxable, but an exemption applies (no nexus, customer exemption certificate, etc.)
• Non-Taxable means the product category itself is not subject to tax in that jurisdiction (e.g., groceries, periodicals)

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Configuration Questions

Q: What happens if I disable "Create transactions" in AvaTax settings?

A: Pelcro will still calculate tax rates for invoices, but transactions won't be recorded in your AvaTax account. This means:

• Customers see correct tax amounts
• But the transactions won't appear in Avalara reports
• You'll need another method for tax reporting/filing

Q: Do I need to set up tax codes for every product?

A: Products without a specific tax code will use the default (P0000000 - Tangible Personal Property). However, if your products have special tax treatment (software, digital content, periodicals, etc.), you should assign the appropriate tax code.

Q: Can components of one bundled plan be taxed differently?

A: Yes. Each component has its own tax code, and AvaTax taxes each component's line at that code. See Bundled Plans.

Q: What origin address should I use?

A: Use your primary business location or the location from which you ship/provide services. This affects origin-based taxation rules in some states.

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Troubleshooting Questions

Q: How can I test if AvaTax is working correctly?

A:

1. Create a test subscription with a known address
2. Check that the invoice shows the expected tax amount
3. Verify the transaction appears in your Avalara portal (if transaction creation is enabled)

Q: Where can I see exactly what Pelcro sent to AvaTax?

A: Open Call logs on the AvaTax settings page. Each call shows the full request and response. Transactions shows the documents recorded in AvaTax with the VAT code for each line.

Q: My customer has a VAT ID, but the sale was still taxed. Why?

A: Check that:

1. The customer isn't marked as tax exempt. An exempt customer's VAT ID isn't sent.
2. The VAT ID is 25 characters or fewer.
3. The sale is cross-border. A domestic sale is taxed even with a VAT ID.

Q: AvaTax was working but suddenly stopped calculating taxes. What happened?

A: Check for:

1. Expired credentials - Verify your AvaTax credentials are still valid
2. Nexus changes - Ensure nexus is still configured for the relevant states
3. Product changes - Verify the product's tax code hasn't been modified
4. Avalara service status - Check Avalara's status page for outages

Q: Can Pelcro support help me configure nexus or tax codes?

A: Pelcro support can help with:

• AvaTax integration configuration in Pelcro
• Troubleshooting why taxes aren't being calculated
• Explaining how the integration works

For nexus determination, tax code selection, and tax compliance questions, we recommend consulting with a tax professional or Avalara's support team.

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Related Resources

• Avalara Admin Console - Manage nexus, tax codes, and reporting
• Avalara Tax Code Search - Find the right tax code for your products
• Avalara Status Page - Check for service outages

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Need Help?

If you've gone through this troubleshooting guide and still have questions:

1. Check your AvaTax settings in Pelcro to verify configuration
2. Review the configured nexus to ensure it includes the customer's jurisdiction
3. Verify the product tax code matches your product type
4. Contact Pelcro support with:
   • The account ID
   • The specific invoice or subscription with the issue
   • The customer's state/country
   • The product and its tax code

Our team can help diagnose why taxes aren't being applied and recommend next steps.