Set up your Avalara tax codes

After you've connected your Avalara account with Shopify, you can set up the Avalara tax codes for your products. This lets you charge taxes in your store using Avalara’s services instead of Shopify’s built-in tax engine.

Default tax codes

Avalara tax codes are unique labels that you can apply to products and variants in your store. Tax codes identify the category that the product belongs to and determines the tax rules that apply to it based on the location in which it is sold.

When you use Avalara AvaTax, your products are initially tagged with a default tax code (physical good tax code P000000). The default can't be changed, but you can add other tax codes if you're selling specific products or services that might need a to use a different code.

Initial set up

Before you start configuring your Avalara AvaTax tax codes, make sure that you complete the following tasks in your Shopify admin and in your Avalara account:

  • Set up your tax rates in your Shopify admin. In the case that Avalara is unavailable, Shopify's tax settings will act as a backup for providing tax rates for your products.

  • Set up your nexus jurisdictions in your Avalara account to inform Avalara AvaTax when and where your company will calculate and report tax. If you make sales in jurisdictions that you haven't set up in Avalara AvaTax, then the resulting tax calculation will return a value of zero.

    Note

    If you need help setting up your nexus jurisdictions, then you can refer to Avalara's Help Center or contact your Shopify Plus Merchant Success Manager for support.

  • Make sure that all tax information that you've provided is the same in both Shopify and Avalara. In your Shopify admin, you can see a comparison of your Shopify and Avalara tax information on the Nexus Information page of the Avalara app. Each state is marked with a Status label:

    • Complete - Your tax information for this state is the same in both Shopify and Avalara.
    • Action required - You have tax information for this state in Avalara that isn't included in your Shopify tax settings. You need to update these settings in Shopify so that they match the information in Avalara.
    • Attention requested - You have tax information for this state in Shopify that isn't included in Avalara. You can update Avalara to include this information, leave the information as is, or delete it from Shopify, depending on whether you expect to have customers in this location.

Add a tax code to a specific product

If the default tax codes don't apply to one of your products or variants, then you can add a different tax code.

Note

You will need to edit the tax codes for your products and variants based on the AvaTax System.

To add a tax code to a product or variant:

  1. Look up the tax codes for your products and variants based on the AvaTax System.

  2. From your Shopify admin, go to Products.

  3. Open a product.

  4. In the Pricing section, click the Tax code drop-down menu to select the appropriate tax code:

    Select a tax code from the drop down menu in the pricing section

    Note

    If you leave the product code blank, then Avalara will assign a standard code (physical good tax code) of P000000 to your product or variant.

  5. Click Save.

Apply tax codes for multiple products and variants

You can apply tax codes to multiple products and variants at once by using the Product or Product variant resource of the Shopify Admin API, or by using the Bulk Editor for Products in your Shopify admin.

To apply tax codes to multiple products and variants by using the Product resource of the Shopify Admin API:

  1. Look up the tax codes for your products and variants based on the AvaTax System.

  2. Use the Product or Product variant resource in the Admin API to add the tax code to your products and variants.

In the following example, the tax code PC040101 is added to the Acme Apron variant:

PUT /admin/variants/variant[id]

{
"variant": {
"option1": "Acme Apron",
"price": "99.00",
"tax_code":"PC040101"
}
}

In the following example, the tax code PC040413 is added to the product variant Youth:

{
"product": {
"title": "Tests-12345",
"body_html": "Hi",
"vendor": "Burton",
"product_type": "Snowboard boots",
"variants": [
{
"option1": "Youth",
"price": "10.00",
"sku": 123,
"tax_code": "PC040413"

},
{
"option1": "Adult",
"price": "20.00",
"sku": "123"
}
]
}
}

Learn more

If you want to learn more about tax compliance, then Avalara's eLearning course on Making Sense of Sales Tax is a great place to start.

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