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How a tax call works between the two systems
Without Avalara, Business Central calculates US sales tax from tax areas, tax jurisdictions and tax groups that you maintain yourself. That is workable for a company with nexus in a handful of states and simple products. It turns into a chore once you sell into many states or carry products taxed in different ways. It also struggles when you need rates for an exact address, not a ZIP code.
With the link in place, Business Central sends the document to AvaTax whenever it needs tax. The call carries company code, customer, ship-from and ship-to addresses. It also carries each line's tax code, quantity and amount, plus any exemption details. AvaTax answers with tax by line and by jurisdiction. Posting then commits the sale in Avalara, on the timing the connector settings define. Committed sales later feed returns and liability reports.
So the calculation request travels one way and the result comes back. Setup lives on the Avalara side, where you keep nexus, tax code rules and exemption certificates. Business Central owns the document, the customer and the posting to the general ledger.
Business Central data mapped to AvaTax
Settings to decide before the first live invoice
Where nexus is registered
Nexus lives in your Avalara account. If a state is missing there, AvaTax returns zero tax for it, which looks tidy on the invoice and is wrong. Your tax advisor should confirm the list.
Quote, order or invoice
Decide whether to estimate tax on quotes and sales orders, or only at invoicing. Early estimates help customers approve totals; the call made at posting is the one that counts.
Marketplace and web orders
Do not tax orders again when a marketplace already collects tax as facilitator. Web store orders need one rule: the store or Business Central asks Avalara, never both.
Exemption certificates
Keep and check certificates in Avalara's exemption tools, not in notes on the customer card. Then an auditor can find them, and the tools flag expiring ones.
Testing Avalara in a sandbox before go-live
- 1
Connect sandbox to sandbox
Pair a Business Central sandbox with an Avalara sandbox account and company, so nothing posted during testing can reach a filing.
- 2
Build a matrix of test invoices
Cover each nexus state, one state without nexus, an exempt customer, a service item, freight, a drop shipment and a partial credit memo.
- 3
Check results against a known answer
In a Business Central Avalara integration test, compare each result with your advisor's view. Do not compare with the old tax areas, which may have been wrong for years.
- 4
Reconcile the ledger to Avalara
At the end of a test period, the sales tax liability accounts in Business Central should match Avalara's liability report for the same dates. Explain any gap before live posting begins.
- 5
Plan for an outage
Write down what happens when AvaTax is down at posting. Either hold the document, or post and recalculate later with a daily check for anything that missed the call.
When the built-in tax setup is enough
- ✓Nexus in one or two states, with few tax areas and rates that rarely change
- ✓A product range taxed the same way everywhere, with few exempt customers
- ✓An advisor who checks rates regularly and is comfortable with the upkeep
Avalara and Business Central: common questions
Does Avalara provide the Business Central connector?
Yes, Avalara publishes its own AvaTax connector for Business Central on AppSource. It installs like any other extension, and you link it to your Avalara account. Our part is usually the configuration around it: tax codes on items, customer exemptions, freight treatment and reconciliation. You rarely need a custom build.
Will Avalara file our sales tax returns?
Only if you subscribe to Avalara's returns service, which is separate from calculation. AvaTax calculates and records transactions, and the returns service can prepare and file from those committed transactions. Whether Avalara files or your own team does, the Business Central ledger and Avalara's records should tie every period. Check the current product lineup with Avalara, since packaging changes.
Can we keep Business Central tax areas for some states?
It is possible, but running two tax engines at once is rarely wise. Mixing them makes it unclear which system produced a given tax amount and complicates reconciliation. Most companies move all US sales tax calculation to Avalara on one cut-over date and keep the old tax areas only for historical documents. Canadian and other non-US taxes deserve their own review.
More Business Central Avalara integration questions
Do we need Avalara if we mostly sell through Shopify or Amazon?
Not always, because storefronts and marketplaces can calculate tax at checkout themselves. The real question is whether Business Central also bills customers directly, through wholesale orders or phone sales, where the storefront's tax engine does not help. If the ERP invoices into several states, Avalara gives one consistent calculation across every channel. Your tax advisor should confirm your nexus position either way.
How do we reconcile Avalara with the general ledger each month?
Compare the tax liability accounts in Business Central with Avalara's liability report for the same period, by state. Gaps in a Business Central Avalara integration usually trace to three causes. Look for documents posted without a tax call, credit memos committed on another date, or invoices voided in one system only. A short checklist in the month-end close catches these while they are still easy to fix. Our month-end close guide covers where that step fits.
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