In IFS Cloud, the default tax code rates setup in Accounting Rules are used when calculating sales tax on customer orders. However, in US, where many different tax codes exist and the rates change frequently, the standard solution is not adequate. The user does not want to change the rates manually every time the tax information has changed.
Avalara offers a software application called Avatax. Avatax keeps track of valid tax information e.g. tax rates and performs tax calculations for the US and Canada markets. The solution is built as a subscription service, where tax information is updated on a regular basis.
IFS has developed an integration for Avalara, which allows the user to rely on Avalara for retrieval of correct tax information when doing tax calculations, without having to update any tax information manually. When a tax calculation is performed on e.g. a customer order, IFS Cloud uses the integration to Avalara to get the correct tax rates letting Avalara do the tax calculations. The integration is supported in following four areas in IFS:
All other areas in IFS Cloud will continue using core functionality for calculating taxes.
The overall concept of the integration for Avalara is; when a tax call is initiated in IFS a call is made to the Avalara Sales Tax software to fetch the correct tax rates based on the information on the sales quotation, customer order, RMA or the customer order invoice. Following main parameters are used to identify the correct tax rate:
In addition to these main parameters, information such as the sales part number, price and quantity is also passed to the Avalara Sales Tax software in order to ensure the correct tax rates are fetched. Based on the information sent to Avalara, Avalara looks up the correct tax rates and tax amounts and return the information to IFS Cloud. The information is then uploaded into the tax lines dialog.
Note! Avalara Integration is only to be used for sales tax calculations in the U.S. and Canada.
In order to utilize the IFS integration for Avalara, some basic data set up is required with regards to the Tax Codes, the Company record, the Customer Addresses and the Sales Parts.
Four generic tax codes are used to represent the City, State, County and District tax rates fetched from the Avalara Sales Tax software. These tax codes must first be added under Accounting Rules/Tax/Tax Codes. Since the tax codes are generic the Tax (%) should be set to zero and the Tax Type should be Tax. The Valid To date for the tax code should be set to a date in the future. Expired tax codes will prevent the system from fetching the correct tax rates from Avalara. Once the four tax codes have been created in the Tax Codes form, the tax codes should be associated with the Generic Tax Codes in Company/Tax Control/External Tax System tab.
The external tax calculation method, located in Company/Tax Control/External Tax System tab, must be selected to specify which third-party tax software that should be used to retrieve the appropriate tax rates. Select the option Avalara Sales Tax. The company id you are using in IFS also needs to be registered in Avalara Sales Tax Software.
External Tax System Parameters page, located in Application Base Setup/Enterprise/Tax/External Tax Systems, is used to define and maintain login information for Avalara. Once the login information is saved, it is possible to verify the connection to Avalara by selecting command Verify Avalara Connection.
There are two Avalara specific basic data values which need to be set up prior to using the interface; Avalara Customer Tax Usage Type and Avalara Tax Codes.
Customer Tax Usage Type is used to categorize customers into to tax categories. These are then used in Avalara software to setup specific tax rules. Once the basic data is added, the Customer Tax Usage Type should be linked to the Customer in the General Information. This value is then inherited to the customer order and it is possible to change at any time while the customer order line is not in status “Delivered”, “Invoiced/Closed” or “Cancelled”.
Avalara Tax Code is used to categorize parts into to tax categories. These are also used by Avalara to create tax rules. Once the basic data is added, the Avalara Tax Code should be linked to the Sales Part in External Tax Parameter tab.
Since the address information is utilized to look up the correct tax rate in Avalara, it is necessary that all addresses are entered correctly on both the company and the customer. Once the address is saved, the interface will communicate with the Avalara Sales Tax software to determine if the entered address is considered a valid address. If valid, the address information is saved to the database. If the entered address is not considered a valid address, an error will be displayed. When entering or updating a customer address, the default company for the user that is set up in Users per Company in Accounting Rules will be used.
Note! Jurisdiction code is not used in the Avalara integration. This is only used for Vertex.
Tax calculation is initiated during various events in the Sales Quotation,
Customer Order, Customer Order Invoice and RMA flows. When initiated, the system
will use the External Tax Calculation Method value on the company record to
determine from where the tax codes and tax rates should be fetched.
The prerequisites in order for IFS Cloud to communicate with Avalara is that the tax liability on the customer address is set to TAX and the sales part is taxable. IFS Cloud does not communicate with Avalara if the tax liability on the customer address is set to EXEMPT or when the sales part is not taxable. When the tax liability is set to EXEMPT or when the sales part is not taxable the tax lines dialog will be empty.
There is a way of suppressing new tax calls to Avalara when entering new Part/Charge lines on a Customer Order or Sales Quotation. This can be beneficial when working with large orders or creating large orders from the server. In order for this to work the option Automatic Fetch of Tax Information at Part/Charge Line Entry needs to be not selected in Company/Tax Control/External Tax System. When this option is not selected the Refresh Tax Information at Release of Customer Order needs to be selected. When suppressing automatic tax fetching at Part/Charge lines entry the user can instead use the Command Fetch External Tax on the Sales Quotation/Customer Order header, to fetch tax information from Avalara on demand when running this process.
For Sales Quotation a new tax calculation is initiated resulting in new tax request being sent to Avalara under the following circumstances:
The Quotation Line Tax Lines dialog will be updated with the data received from Avalara.
For Customer Order a new tax calculation is initiated resulting in new tax requests being sent to Avalara under the following circumstances:
The Customer Order Line Tax Lines dialog will be updated with the data received from Avalara. There is a possibility to not send tax requests upon releasing the order. Then you need to not select the option Refresh Tax Information at Release of Customer Order in Company/Tax Control/External Tax System tab.
For Customer Order Invoice a new tax calculation is initiated resulting in new tax request being sent to Avalara under the following circumstances below:
The final tax calculation is initiated at time of printing the customer invoice and upon receiving the response from Avalara, the invoice line taxes are updated according to the data in the xml file before the invoice is actually printed. As part of the final tax calculation request, the invoice lines are also written to the Tax Registry in Avalara.
Return Material Authorizations can either be created manually or automatically from the customer order line(s).
When created manually, the sales tax calculation is initiated when a new RMA line or RMA Charge line is added to the RMA. New tax calculation request(s) are sent to Avalara and upon receiving the response file(s), the RMA Line Tax Lines dialog or the RMA Charge Tax Lines dialog will be updated according to the data received in the response file.
When created automatically, the system copies the tax lines from the customer order line(s) and/or the customer order charge line(s) and adds this information to the RMA Line Tax Lines screen or the RMA Charge Tax Lines dialog.
A new tax calculation is initiated resulting in new tax requests being sent to Avalara under the following circumstances:
In order to communicate with Avalara, four routing addresses should be added in IFS Connect/Routing Addresses. These are: