> 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/overview.md).

# Overview

***

### **Introduction**

Sales Tax Automation services such as **Avalara AvaTax** enable businesses to automate tax calculation and ensure compliance with regional tax regulations.

The integration of Avalara with XoroERP allows the system to:

* Automatically calculate tax in real time
* Eliminate manual tax rate configuration
* Handle complex tax rules across jurisdictions
* Support both Sales and Purchase transactions

***

### **How the Integration Works**

When Avalara is enabled:

1. A transaction is created in XoroERP
2. Transaction details are sent to Avalara
3. Avalara evaluates:
   * Address (Ship From / Ship To)
   * Item taxability
   * Customer tax status
   * Nexus (tax obligation region)
4. Tax is calculated and returned
5. XoroERP applies the tax to the transaction

***

### **Key Concepts**

***

#### **Tax Calculation vs Record Document**

| Setting         | Description                                     |
| --------------- | ----------------------------------------------- |
| Calculate Tax   | Only calculates tax, does not store transaction |
| Record Document | Stores transaction in Avalara for compliance    |

***

#### **Entity Use Code (Customer Tax Status)**

* Defined in Customer → Sales Tax Tab
* Determines if a customer is:
  * Taxable
  * Tax Exempt

***

#### **Tax Category Code (Item Tax Code)**

* Defined in Item → Tax Settings
* Determines how the item is taxed


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