Sales tax in the United States is complex, with over 10,000 taxing jurisdictions (states, counties, cities) each with different rates, rules, and requirements. AvaTax is Avalara's automated tax determination service that calculates sales tax, VAT, and other transaction taxes. Light integrates with AvaTax to automate tax calculation and reporting for US operations.
Last updated Feb 8, 2026 · 5 min read
Sales tax in the United States is complex, with over 10,000 taxing jurisdictions (states, counties, cities) each with different rates, rules, and requirements. AvaTax is Avalara's automated tax determination service that calculates sales tax, VAT, and other transaction taxes. Light integrates with AvaTax to automate tax calculation and reporting for US operations.
US sales tax is a consumption tax applied at the point of sale. Key characteristics:
Light cannot manually calculate accurate tax for thousands of jurisdictions. AvaTax automatically determines the correct tax treatment.
Good to know: Economic nexus means you must collect sales tax in any state where you have significant sales, even without a physical presence.
To enable AvaTax tax calculation:
Light maintains the integration and validates AvaTax connectivity.
When you create an AR (accounts receivable) invoice with AvaTax enabled:
This happens automatically without manual intervention.
AvaTax requires you to map Light entities to AvaTax company profiles:
Light then uses the correct AvaTax profile when calculating tax for transactions of that entity.
AvaTax requires transaction items to be classified by tax treatment. Configure in Light:
Light applies the correct classification to each invoice line, ensuring AvaTax calculates accurately.
Tip: Different states have different tax treatments for services and digital products. AvaTax handles these state-specific rules automatically.
Resellers and non-profit organizations often hold tax exemption certificates. If a customer claims exemption:
Light maintains a record of all exemption certificates for audit purposes.
AvaTax considers ship-to address when calculating tax (destination-based sales tax). In Light:
Ensure accurate customer addresses to get correct tax calculations.
When you issue a credit note (CN) for returned goods or services:
This maintains accurate tax accounting and prepares accurate tax return reporting.
Light integrates with AvaTax Managed Returns, which prepares your sales tax returns:
Light can also integrate with AvaTax payment services to remit tax directly to jurisdictions.
Good to know: Different states have different filing frequencies (monthly, quarterly, annually). AvaTax manages these different schedules and reminds you when each return is due.
As your business grows, you may establish nexus in new jurisdictions (which requires collecting/remitting sales tax):
If you establish nexus in a new state, activate it immediately to ensure accurate tax collection going forward.
For companies with multiple entities (subsidiaries, branches):
This is useful when subsidiaries operate in different states or have different tax characteristics.
Light and AvaTax maintain complete audit trails:
Export audit documentation:
This documentation supports audit procedures and provides evidence of tax compliance.
Tax calculation failed: Verify the customer address is complete and accurate. Incomplete addresses prevent accurate tax calculation.
Missing tax code: Ensure all items on invoices have a tax code configured in Light and mapped to an AvaTax item type.
Exemption not applied: Verify the exemption certificate is uploaded and current. Expired certificates won't apply.
Wrong tax rate: AvaTax uses shipping address to determine tax. Verify the ship-to address is correct.
Good to know: Test AvaTax connectivity by creating an invoice with AvaTax enabled. Light immediately sends the transaction to AvaTax and displays the calculated tax.
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