Workflow with Added Tax Services
Validate Workflow
Once Avalara is integrated into Xoro, it will be shown under the “Active Services”.
Available actions:
Edit
Disable
Delete
After configuration, tax calculation must be validated through transactions.
Pre-Configuration Requirements
Customer Setup (Entity Use Code)
Path: Customer → Sales Tax Tab
Field: Entity Use Code
What this means
This field indicates whether a customer qualifies for a tax exemption.
If your customer falls under a special category—such as Federal Government, State Government, or Charitable Organization—you can assign an appropriate Entity Use Code. This helps the system apply the correct tax treatment automatically.
How it works
If an Entity Use Code is defined: The system checks the exemption rules and applies reduced or zero tax where applicable
If not defined: The customer is treated as a regular taxable customer, and full tax is applied
Item Setup (Tax Category Code)
Path: Item → Tax Settings Tab
Field: Tax Category Code
What this means
This field defines how a product or service should be taxed.
Each item can belong to a specific tax category (for example: general goods, food, digital services, etc.), and different categories may be taxed differently depending on the location.
How it works
If a Tax Category Code is assigned: The system uses it to apply the correct tax rules for that item
If not assigned: The system may not be able to determine the correct tax, which can result in incorrect or inconsistent tax calculations
Transaction Flow
When Avalara is configured in the Manage Tax Services module, tax calculation in XoroERP becomes automated and is seamlessly integrated into the transaction workflow.
How Tax is Calculated
While creating a transaction (such as a Sales Order), the system gathers key details like:
Customer information (including Entity Use Code, if defined)
Item details (including Tax Category Code)
Shipping and billing address
When you click Save, XoroERP sends this information to Avalara, which evaluates the applicable tax based on location, product type, and customer tax status.
The calculated tax is then displayed in the Tax Summary pop-up, where you can review the tax breakdown before applying it.
Tax Calculation Process
The transaction flow demonstrated here is based on the Sales Order module
The corresponding transactions recorded in Avalara are shown in the screenshots below for reference
Add Customer and create transaction (Sales Order / Invoice / Purchase Order)
System validates:
Customer setup
Item tax code
Address details
Add Item to the Sales Order
Click Save. This will open a pop-up window where you can view and calculate tax.
Transaction details are sent to Avalara
Avalara evaluates:
Address
Item taxability
Customer exemption
Tax is returned
XoroERP applies the tax
How Tax is Recorded
After reviewing the tax in the pop-up, you click Apply & Save to finalize the transaction.
For Sales transactions, the tax is not immediately recorded in Avalara at the Sales Order stage. The transaction is recorded only after the Sales Order is converted to converted into an Invoice, as that is considered the final document for tax reporting.
If Record Document is enabled: The transaction is recorded in Avalara at the Invoice stage, and is used for tax reporting and filing
If Record Document is disabled: The tax is calculated and applied in XoroERP, but the transaction is not recorded in Avalara
In simple terms:
Sales Order → Tax is calculated and shown
Invoice → Tax is finalized, and the transactions are recorded as shown below. (if enabled)
If Record Document is disabled: The tax is applied within XoroERP, but the transaction is not saved in Avalara.
Modules Affected
Sales Order
Invoice
Purchase Order
Special Scenarios
Customer Tax Exemption
Controlled via Entity Use Code
Tax reduced or removed if applicable
Returns and Adjustments
Triggered via Invoice Credit Memo
Tax recalculated proportionally, and transactions are recorded successfully in Avalara.
Void Transactions
Cancels tax record in Avalara
Prevents incorrect reporting
Multi-Region Tax Handling
Avalara determines tax based on jurisdiction
Common Scenarios
Invalid Address
Incorrect data
Tax not calculated
Missing Tax Code
Configuration issue
Incorrect or failed tax
Avalara Disabled
Toggle off
No tax calculation
Avalara Unavailable
External issue
Retry or failure
System Behavior
Displays error messages
Logs failure details
Allows correction and retry
FAQs
Q1: Why is the tax not calculated? Check:
Avalara configuration
Tax code setup
Customer configuration
Address details
Q2: Why is tax zero?
The Customer may be exempt
Q3: Can Avalara be disabled without removing the configuration?
Yes, using the enable/disable toggle
Q4: What happens if Record Document is disabled?
Tax is calculated but not stored in Avalara
System Behavior Summary
Valid configuration → Tax calculated
Missing tax code → Warning or incorrect tax
Invalid address → Tax calculation fails
Exempt customer → Reduced or zero tax
Final Understanding
XoroERP sends transaction data
Avalara calculates tax
XoroERP applies the result
Optional recording ensures compliance
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