---
title: Avalara Avatax – Set a Customer to be Tax Exempt in U.S. and Canada
description: Avatax is a comprehensive cloud-based tax calculation. What can Avalara do? Avalara and NetSuite will do all the heavy lifting. Many of you use Avalara as your tax software for your business that run on Netsuite. Often you run into issues to manage exemption certificates. Avalara ensures your tax-exempt customers are keeping their certificates accurate and up to date.
image: https://blog.concentrus.com/hubfs/pexels-karolina-grabowska-4386367.jpg
---

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# Avalara Avatax – Set a Customer to be Tax Exempt in U.S. and Canada

Posted by [Kevin Suh, NetSuite Administrator](https://blog.concentrus.com/author/kevin-suh-netsuite-administrator) on Nov 22, 2021 12:00:00 PM

![Kevin Suh, NetSuite Administrator](https://blog.concentrus.com/hubfs/kevin-3b350224.jpeg)

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![pexels-karolina-grabowska-4386367](https://blog.concentrus.com/hs-fs/hubfs/pexels-karolina-grabowska-4386367.jpg?width=756&name=pexels-karolina-grabowska-4386367.jpg)

What is Avalara AvaTax? Avalara AvaTax automatically calculates sales and use tax for transactions, invoices, and other activity powered by NetSuite. Avatax is a comprehensive cloud-based tax calculation. What can Avalara do? Avalara and NetSuite will do all the heavy lifting such as:

- - - Improve rate accuracy and reduce returned shipments
          - Easily manage taxability rules across a vast product inventory
          - Apply the right tax for each customer — no matter their location or sales channel
          - Offload the manual and complex methods of assessing use tax
          - Better assess tax obligations in each state
          - Remove the manual drain of filing and remittance
          - Let NetSuite do the work of managing exemption certificates
          - Reduce audit risk by validating all your tax-exempt sales

Many of you use Avalara as your tax software for your business that run on Netsuite. Often you run into issues to manage exemption certificates. Avalara ensures your tax-exempt customers are keeping their certificates accurate and up to date. When certificates expire or become invalid, the system provides an alert at the time of sale. I will share the way to handle exemptions solely through Netsuite for your U.S. customers and to exempt Canadian tax for your Canadian customers through Avalara Avatax account.

For U.S. customers, there are two ways to exempt a customer. This applies if your company isn't using AvaTax Exemption or Avalara CertCapture, and if you're not using the entity/use code field on an invoice. I will post another blog about CertCapture.

1. 1. In NetSuite, on the customer record go to the AvaTax tab. Uncheck 'TAXABLE' field. The Tax Item field should remain as AVATAX. When the invoice is posted to AvaTax, 'Exempt' will be populated in the 'Customer Exempt No.' field.  
        ![avalara 1](https://blog.concentrus.com/hs-fs/hubfs/avalara%201.png?width=324&name=avalara%201.png)

OR

1. 1. Type the word EXEMPT in the AvaTax 'Exemption Certificate No.' field. Any text in the field will make the customer exempt.  
        ![avalara 2](https://blog.concentrus.com/hs-fs/hubfs/avalara%202.png?width=456&name=avalara%202.png)
     2. This method does not work in Hawaii. Instead, use the below entity/use codes.  
        ![Avalara chart 1](https://blog.concentrus.com/hs-fs/hubfs/Avalara%20chart%201.png?width=670&name=Avalara%20chart%201.png)

For Canadian customers, this process does not exempt your Canadian customers. The issue here is that the Exemption No. field defaults the transaction to Entity Use Code “L” -Other, which is not a valid exemption in Canada. You would need to create an Exempt Entity Tax Rule, making Entity Use Code “L” - Other exempt in Canada, or use entity use code “C” -Tribal instead of (or in addition to) the exemption number

1. 1. Currently, the only way to exempt customers of tax in the country of Canada is by using the exemption reason of Tribal Government, or entity use code “C”. 
            1. 1. You will have to either pass this Entity Use Code on your transaction.
                     2. Or, you will need to enter an exemption certificate with the exemption reason of “C” – Tribal.
     2. To exempt GST/HST, but **still charge** the Provincial Taxes create, an exemption specifically for Canada.  
        ![avalara 3](https://blog.concentrus.com/hs-fs/hubfs/avalara%203.png?width=696&name=avalara%203.png)
     3. To exempt PST/QST, but **still charge** GST/HST, create an exemption specifically for the affected province(s)  
        ![avalara 4](https://blog.concentrus.com/hs-fs/hubfs/avalara%204.png?width=693&name=avalara%204.png)
     4. To exempt **all** Canadian taxes, create an exemption for Canada and another for the affected province(s) as a multi-jurisdictional certificate.  
        ![avalara 5](https://blog.concentrus.com/hs-fs/hubfs/avalara%205.png?width=700&name=avalara%205.png)
     5. Note: While the only way to exempt tax in the country of Canada is by using the exemption reason of Tribal Government, or entity use code “C”, each province has their own exemption reasons. Please review the below Exemption Reason Matrices for this information. These matrices will update according to the taxing jurisdiction updates.  
            1. 1. Exemption reason matrix for Canadian provinces
                     2. Exemption reasons differ from province to province. Valid entries for the business type and its exemption reason are indicated below.
                     3. The letter columns correspond to the exemption reasons described in the first table in this article.
                     4. T = Taxable (non-exempt)
                     5. G = GST taxable only
                     6. E = Exempt (non-taxable)
                     7. N = No entity exemptions allowed

![Avalara chart 2](https://blog.concentrus.com/hs-fs/hubfs/Avalara%20chart%202.png?width=755&name=Avalara%20chart%202.png)

Sales tax compliance and exemption aren’t among your customers’ core business objectives. Rather, it’s a mandatory and AvaTax can help overcome. Avalara’s tax compliance suite enables businesses to automate sales tax calculations, electronically manage exemption certificates, and much more. If you want to learn more about how Netsuite and AvaTax can help your distribution business, contact Concentrus today to discuss your needs.

 

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