Advanced Billing provides the ability to automatically collect European Union VAT Taxes via the Avalara AvaTax tax service. Advanced Billing uses the updated 2015 EU VAT tax rules.
Configuring Avalara VAT Tax
Set your Tax Origin Address
To begin, make sure that you have a “Tax Origin Address” defined. This is your business’s address. Avalara needs a full address on file to calculate the correct tax rates.
Configure your Taxable Regions
Next you will define your Taxable Regions. These regions inform Advanced Billing where your company wishes to calculate and report tax.
Step 3: Enable Avalara Taxes
Finally, click the ‘Enable’ button in the Avalara Sales Tax section. Note that doing so will disable any existing custom taxes that you have.
Marking Products and Components as Taxable
Unless otherwise specified, all products and components are NOT eligible for taxes. Once a tax is defined, you will need to update your existing products and components so that they can be taxed. To do this, edit the product or component and check the ‘This product is subject to taxes’ checkbox.
You will also want to ensure that the “Require Shipping Address at signup?” checkbox is checked for each product.
Note that Avalara needs a full address on file in order to calculate taxes.
Creating Taxable Subscriptions
In order for a subscription to be considered taxable, the subscription must have a valid shipping or billing address. The address information must be complete, and be formatted properly in order to correctly determine the tax locale of the charge.
Required Country Format for Taxable Subscriptions
Countries should be formatted as 2 characters. For more information, please see the following wikipedia article on ISO_3166-1.
Required State Format for Taxable Subscriptions
- States Outside the US (2-3 characters): To find the correct state codes outside of the US, please go to ISO_3166-1 and click on the link in the “ISO 3166-2 codes” column next to country you wish to populate.
Special considerations of VAT tax
In some cases, the EU VAT rules treat digital products differently than physical products. If you have specific questions surrounding the application of taxes to your product or service, we recommend that you contact your National Administrations office for tax-related questions.
Defining the Tax Type
When editing your products, select either “Digital Service” or “Physical Good” from the Tax Type dropdown. This information will be sent to Avalara to ensure that the correct tax rates are applied.
Correct VAT Format for Public Signup Pages
As customers enter their VAT information at the Public Signup Page level, it’s important for them to follow the on-screen instructions. Your customers must omit the country code from their VAT number upon entry. Otherwise, taxes will be assessed upon the purchase.
Coupons and Taxes
When applied in conjunction, taxes are applied to the total cost of the subscription AFTER the coupon adjustment has been accounted for.