> For the complete documentation index, see [llms.txt](https://docs.xorosoft.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.xorosoft.com/xoroerp-1/utilities/manage-tax-services-avalara-integration/configuration-setup.md).
# Configuration Setup
***
Currently, Xoro supports Avalara to get automatic Sales tax calculations. However, more services will be added in the future.
To manage all your tax-related services, go to **Menu > Utilities > Manage Tax Services**
Let us find out how the Avalara Tax Service works within the Xoro system.
#### Step 1: Generate Credentials
A license key is required to connect Xoro to Avalara Tax. If you generate a new license key, update it in Xoro because your old license key won’t work anymore.
To generate a License key follow the steps below:
* Login to your Avalara account.
* Add/Reset the License Key.
* You will receive the credentials through your registered email.
* Once the credentials are generated you can use them in Xoro for the integration process.
***
#### **Important Notes:**
* Regenerating the license key invalidates the previous key
* Always update the latest credentials in XoroERP
***
### **Integrating Avalara with XoroERP**
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#### **Navigation**
**Menu → Utilities → Manage Tax Services**
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#### **Add Service**
* Click **Add Services**
* Select **Connect Avalara**
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#### **Configuration Fields**
After connecting **Avalara** in the **Manage Tax Services** module, you will see a set of configuration options. These settings help you control how tax is calculated and saved when you create transactions in XoroERP.
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**Account Name**
* Internal reference name
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**AvaTax Account ID**
* Numeric ID provided by Avalara
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**AvaTax License Key**
* Authentication key
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**AvaTax Company Code**
* Company identifier in Avalara
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**Connection Type**
* Sandbox (testing)
* Production (live)
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**Country**
* Defines the tax jurisdiction
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### **Functional Settings**
***
Each setting affects what happens when you click **Save** on a transaction and review the tax in the **Tax Summary pop-up**.
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#### **Enable AvaTax for Sales**
Use this setting to decide whether Avalara should calculate tax for your **Sales transactions**.
When this option is enabled, XoroERP automatically uses Avalara to calculate tax whenever you create or save Sales documents such as Sales Orders, and Invoices. You do not need to manually manage tax rates, as Avalara will calculate the correct tax based on location, product type, and customer details.
When this option is disabled, Avalara will not be used for Sales. In that case, tax will be calculated using the default or manually configured tax settings within XoroERP.
{% hint style="info" %}
Toggling this ON means the system will automatically calculate accurate tax for your sales order transactions.
{% endhint %}
***
#### **Enable AvaTax for Purchase**
This setting controls whether Avalara should be used for **Purchase transactions**.
When enabled, XoroERP calculates tax automatically for Purchase Orders using Avalara. This helps ensure that the tax applied to purchases is accurate and aligns with the applicable rules for vendor location and item type.
When disabled, tax for Purchase transactions will not be calculated using Avalara, and you will need to rely on manual or default tax settings.
{% hint style="info" %}
Toggling this ON means the system will automatically calculate accurate tax for your purchase order transactions.
{% endhint %}
***
#### **Calculate Tax**
When the **Calculate Tax** option is enabled, XoroERP automatically calculates tax using **Avalara.** Whenever you save a transaction, the calculated tax is displayed in the Tax Summary pop-up.
When this option is disabled, XoroERP does not use Avalara, and tax is instead handled using the ERP’s default or manually configured tax setup.
**In simple terms:**
* **Enabled** → Tax is calculated automatically using Avalara
* **Disabled** → Tax is managed within XoroERP without Avalara
***
#### **Record Document**
This setting determines whether the transaction should be saved in Avalara after tax is applied.
When enabled, once you review the tax in the pop-up and click **Apply & Save**, the transaction is recorded in Avalara. This is important for maintaining proper tax records and for future tax reporting and filing.
When disabled, the system will still calculate and show tax, but the transaction will not be stored in Avalara. This means it will not be considered for tax reporting purposes.
{% hint style="info" %}
Toggling this ON means that after you confirm the tax, the transaction is saved for official tax reporting.
{% endhint %}
***
#### **Tax Item Per State**
This setting is useful if you deal with transactions across different states or regions.
When enabled, XoroERP allows tax to vary for the same item depending on the state or location where it is being sold or delivered. Since tax rules can differ from one state to another, this ensures that the correct tax is applied based on the destination.
When disabled, the same tax logic is applied to an item regardless of the state, which may not always be accurate for businesses operating in multiple regions.
{% hint style="info" %}
Toggling this ON applies different tax rules for the same item based on where it is sold.
{% endhint %}
***
#### **How These Settings Work Together**
When you create a transaction and click **Save**, here’s what happens:
* XoroERP checks whether Avalara is enabled for that type of transaction (Sales or Purchase)
* If enabled and **Calculate Tax** is turned ON, the system calculates tax automatically
* The **Tax Summary popup** appears showing the calculated tax
* After reviewing, you click **Apply & Save**
* If **Record Document** is enabled, the transaction is also saved in Avalara for reporting
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#### **Quick Understanding**
* Enable AvaTax for Sales → Use Avalara for Sales transactions
* Enable AvaTax for Purchase → Use Avalara for Purchase transactions
* Calculate Tax → Automatically calculate tax when saving
* Record Document → Save the transaction in Avalara for reporting
* Tax Item Per State → Apply different tax rules based on location
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#### **Toggle Behavior Summary**
| Calculate Tax | Record Document | Behavior |
| ------------- | --------------- | ----------------------------------------------------------------------------- |
| ON | OFF | Tax is calculated automatically using Avalara. It is not recorded in Avalara. |
| ON | ON | Calculates and records using Avalara. |
| OFF | ON | Not recommended |
| OFF | OFF | Avalara not used |
***
### **Test Connection**
* Click **Test Connection**
* System validates:
* Credentials
* Environment
* Company mapping
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#### **Save Configuration**
* Saved configuration appears under **Active Services**
***
---
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