Avalara Implementation(A Case Study for Avatax)

- Donald Fernandes

2015

2

Agenda

� (TO-BE) Taxation Process Flow

�Scope + Assumptions

�Avalara Configurations

� Global Settings

� Company

� Nexus Jurisdictions

� Items and Tax Codes

�High-Level Test Scenarios

�Finance Adjustment Processing

� Avalara IT Production Support

3

Scoping + Assumptions (June Go-Live)

� USD Transactional Currency Only

� Ship-To Countries with Export Compliance Only

� US Sales Taxation Only (no International Sales, GST or VAT Tax)

� Successfully captured Credit Card Transactions only

� 32 Nexus States (within US)

� Customer Exemption Automation Functionality: out of scope

� 4 Bundle SKUs (see listed in reference)

� Avalara Tax Filing Functionality: out of scope

� Application only consumes standard Avalara (Avatax) Tax Codes

�Vertex Configurations and Avalara Configurations equivalently match up

�Tax Code for Parent SKU EQUALS Tax Codes for ALL respective Child SKUs

4

5

Avalara Configurations (Global Settings)

# Field Navigation Value(s)

1 Address Validation Options

> Settings UPPERCASE

2 Exemption Certificate Options

> Settings Enable ECMS (checked)

3 Account ID > Settings XXXX1234

4 License Ley XXXXAB456

6

Avalara Configurations (Business Users – Company Admins)

# Field Navigation Value

1 User Name > Settings > Manage Users TaxManager@company.com

2 User Name > Settings > Manage Users TaxAnalyst@company.com

…

7

Avalara Configurations (Transacting Company)

# Field Navigation Value(s)

1 Company Code Organization > Company ABC_COMPANY

2 Company Name Organization > Company ABC Company, Inc

3 Separate Reporting Entity Organization > Company Yes

4 Business Tax Identification # (TIN)

Organization > Company XXXX1234

5 Default Country Organization > Company Settings United States

6 Base Currency Organization > Company Settings USD

7 Rounding Level Organization > Company Settings Line

8 Company Address Organization > Company Settings 100 Anytown, AnyCity, CA-12345, USA

9 Primary Contact Organization > Primary Contact Tax ManagerTaxManager@company.com

8

Avalara Configurations (Nexus Jurisdictions)

# Field Navigation Value(s)

1 Country Organization > Company > Nexus Jurisdictions

United States

2 State Organization > Company > Nexus Jurisdictions > Select

<see Nexus Taxability Matrix>

3 Tax Type Organization > Company > Nexus Jurisdictions > Select

Use and Sellers Tax

4 Effectivity Dates Organization > Company > Nexus Jurisdictions > Select

01/01/2010 - 12/31/2099

9

Avalara Configurations (Items)

# Field Navigation Value(s)

1 Item Code Organization > Items SKU.1111SKU.2222SKU.3333SKU.4444

2 Tax Code (All Items) Organization > Items DC010500Computer Software (prewritten/canned) electronically downloaded

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Avalara Configurations (Custom Rule)

# Field Navigation Value(s)

1 Rule NameRegionTax CodeTaxability

Organization > Tax Rules Name:ZERO TAX FOR NJ DC010500Condition:NEW JERSEYDC010500Outcome:No

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Sales Tax Computational Differences between Vertex and Avalara

Avalara Vertex Mitigation/ Resolution

Tax Code configured at the Parent

(Bundle) SKU level

Tax Code configured at the Child

(component) SKU level

Configure Child and Parent SKU

to use same (equivalent) Tax

Codes

All applicable Nexuses configured Some Nexuses may not be in sync Correct/Complete Vertex Nexus

configuration

All Customers will be treated as non-

Exempt

Automated Customer Exemption works

as configured

**Implement Avalara CertCapture

module, and migrate existing

Certificates

Address Lookup Logic:

Attempt #1: using City+State+Zip

Attempt #2: using Zip only

Address Lookup Logic:

Attempt #1: using City+State+Zip

Use Discrepancy Report

Offline corrective action (TBD)

** To be addressed in future release

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Avalara-Vertex Sales Tax Reconciliation ReportReport Name: Avalara-Vertex Sales Tax Reconciliation Report

Report Purpose: To assist reconciliation between Avalara and Vertex Taxation for eCommerce Orders

Report Parameters: Invoice (Transaction) Date FromInvoice (Transaction) Date ToCustomer Number

Show Transactions: All OR Discrepancy Only

Report Data Filters: Invoice Source = Order Management

Sales Order eCommerce Flag = Yes

Invoice Status = Complete

Round (Avalara Tax Amount) <> Round (EBTax Tax Amount)

Report Columns and

Mockup:

Listed in order –

Invoice (Transaction) Number

Invoice (Transaction) Date

Invoice Amount

Sales Order Number

Ship To Customer Number, Name,

Ship To Address (concatenated string)

Bill To Customer Number, Name,

Bill To Address (concatenated string)

Customer Exemption Flag (DFF)

SFDC Quote Number (DFF)

SFDC Opportunity Number

Customer Purchase Order

Avalara USD Tax Amount (DFF)

EBTax USD Amount (total derived)

Report Format: Tabular Excel (preferred)

Report Platform: Oracle (SRS)

Report Execution Mode: On-demand for Internal Use of Company Technology only

Report Access: Receivables Manager, Receivables User, Tax Manager, etc AR responsibilities

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Test Scenarios# Scenario/ Process Example Test Data

(non-Exempt Customers only)Expected Result

1 Bundle SKU

A) Fully Taxable Nexus State

B) Non-Taxable Nexus State

C) Partially Taxable Nexus State

4 SKU * 32 Nexus State combinations

A) NY, MN

B) CA

C) CT

Compute appropriate Sales Tax,

and confirm via

Standard Avalara and Sales Tax

Reports

2 Same SKU as above w/ a Sub-State

Jurisdiction (example Special District)

LA – East Baton Rouge (Special)

CO - Denver

== as above ==

3 Same SKU as above w/ non-Nexus

State

VT

DE

Order should book and progress

as normal, with zero Sales Tax

11 Invalid US Address (City-Zip

combination)

Zip Code = 97083

State = NY

Zip and State should match

Order should not get booked

12 Different Sales Tax Amounts computed

from Avalara and Vertex

Oracle Discrepancy Report

should identify exception for

offline action

13 International Ship-To Address Country = GB Order should book and progress

as normal, with zero Sales Tax

14 Exempt Customer books Order <TBD> - Identify Over taxation within

Oracle Discrepancy Report

- Process Refund/ Re-

imbursement from Collecting

Authority

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Handling Vertex-Avalara Discrepancy (TBD)

Scenario Possible Cause Probability of Occurance

How to Identify? Finance Mitigation (AR User)

Customer is

Overcharged

Sales Tax

Calculation Error

OR

Missing Exemption Cert

OR

<TBD>

Low-Medium Customer �

Company Customer

Care �

Finance Team

OR

Avalara Discrepancy

Report �

Finance Team

1. Contact Customer to receive CC details

2. Validate and receive approval for Refund

3. Process Refund using Virtual Terminal on

Authorize.net for corr. Transaction ID

4. Provide record of Refund to Tax,

Customer Care Departments

Customer is

Undercharged

Tax or no

Sales Tax

Calculation Error

OR

<TBD>

<TBD> Avalara Discrepancy

Report �

Finance Team

1. Do not Claim Tax from Customer

2. Record discrete Adjustment for Cash(CR)

and Tax Expense (DR) in Oracle (w/ no

Revenue/ AR impact)

Notes:• Avalara is our accurate reference for Taxability Driver Configurations (except Customer Exemptions)

• Business policy is to only provide Refunds to Tax component of the Sale

• Refunds are processed using Credit Card and not Check, as Payment Method

• Temporary access will be provided to AR Manager for processing Refunds on Credit Card Gateway

• There is no impact on Aging, Receivable or Revenue accounts owing to above Tax adjustments.

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Adjustment Functionality (Avalara)Scenario Example Data

(Sales Orders)How to Identify? Resolution Steps on Avalara

(Manual process subject to SOX Approvals)

Customer Credit

(Refund) for fully

Collected Invoice in

Oracle

019651 AR/OM Team to advise

Tax DepartmentCreate a NEW Transaction of Document Type “Return Invoice”

and populate appropriate Reference Code

Cancelled Orders,

which were never

Invoiced or Collected

014637

015065

015464

016293

017119

023923

Sales Ops to advise

Tax DepartmentQuery existing Transaction and use the VOID function

Partial Invoice

Adjustment (Taxable

Amount) in Oracle

<none> AR/OM Team to advise

Tax DepartmentEdit existing Transaction using appropriate Adjustment Reason

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Production Business Support

Company Name: Company Technology

Avalara Support URL: http://www.avalara.com/support/

Avalara Support Tel: 1-877-780-4848

Support Email: Support@Avalara.comHelpdesk@company.com

Service Alerts: http://status.avalara.com/

KB URL: https://help.avalara.com/

AvaTax Production URL: https://admin-avatax.avalara.net/

AvaTax Sandbox URL: https://admin-development.avalara.net

Avalara Account Number: XXXXYYYYY

Account Manager (Vendor): SalesRep@@avalara.com

Business Process Owner TaxManager@company.com