Calculate tax with Avalara

The Stripe Connector for NetSuite supports using the Avalara AvaTax connector to calculate tax with Avalara on Stripe invoices. The NetSuite connector syncs these invoices to NetSuite and records the calculated tax.

How it works

The Avalara AvaTax connector calculates the tax and then adds it to the Stripe invoice as a standalone invoice item. Stripe invoices must remain open for a period of time for Avalara to apply the calculated tax amount. The tax amount appears as an additional line item (or Stripe Invoice Item) labelled Sales Tax.

To use this functionality, enable the pay_immediately parameter on your account. Tax calculation then occurs automatically after the first billing cycle. You can also calculate tax with just a postal code. Consult your tax professional about the best approach for your business.

Set up Avalara

You must have an Avalara test environment to fully test the Stripe Connector for NetSuite with Avalara. Stripe live mode and test mode transactions can’t process at the same time.

Configure the Avalara environment to match your Stripe test account:

• For Tax On Invoices, select Recurring and Normal.
• Set up the item mapping to determine the Stripe items for Avalara to tax.

When you successfully integrate Avalara with Stripe, address information gets added on Stripe customer metadata fields that are specific to Avalara. When Stripe initiates a subscription, we make sure tax gets added to a payment by using the pay_immediately: false parameter to delay immediate payment. When Stripe generates an invoice for the next subscription billing period, an Avalara line item gets added automatically to the Stripe invoice.

Webhook setup

Avalara doesn’t automatically receive webhooks from your Stripe account. You must manually add the Avalara webhook URL to each environment that you want to test Avalara. To do so, copy the Avalara webhook endpoint from the AvaTax setup and add it to the Stripe webhooks admin (API > Webhooks).

To process test webhooks, connect to Avalara’s sandbox system through the AvaTax for Stripe dashboard. You can only connect to one Avalara environment at a time. Learn about how to use Avalara AvaTax for tax calculation.

AvaTax tax code

If you use a tax engine in NetSuite, it likely calculates and records taxes due on any invoices created in NetSuite. If you use Stripe Billing invoices, Avalara calculates and records the tax amount before the invoice syncs to NetSuite. To make sure that Avalara doesn’t calculate taxes in NetSuite, the connector sets the tax code on the invoice and line item level to Not Taxable.

If a Stripe price links to a NetSuite item that has an AvaTax tax code, the Avalara tax system overrides the Stripe Connector defaults and calculates the tax twice. Make sure that all NetSuite items linked to Stripe prices don’t have an AvaTax tax code.

Tax representation in NetSuite

Stripe represents the taxes calculated by Avalara as a Stripe Tax line item on the NetSuite invoice. You can rename the line item, edit the liability account, or edit other aspects of the item. Customise the name and account to align with how you manage taxes in NetSuite.

If you use Avalara outside the NetSuite environment to calculate tax, you can’t use the Avatax sales tax item to represent tax in NetSuite. This special tax item triggers a call to Avalara that records the taxes for that order again. Taxes calculated by Avalara outside of NetSuite aren’t represented by tax codes or groups.

Avalara race condition

The Avalara Connector has a race condition to consider. If you use the invoice.created webhook, Avalara might calculate taxes after you add usage-based billing through Stripe standalone invoice items. This means tax might not calculate and record properly.