# Transactions in AvaTax

Source: https://developer.avalara.com/avatax-dm-combined-erp/sales-tax-badge/transactions/

# Transactions in AvaTax

At its core, AvaTax is designed to help you calculate taxes on a sales transaction between two parties. The parameters in the [CreateTransaction](https://developer.avalara.com/api-reference/avatax/rest/v2/methods/Transactions/CreateTransaction/) API call help you ensure your tax calculation is correct. Specifically, here's how AvaTax reads a transaction.

1.  AvaTax first reads the address information. Where are the goods shipping from, and where are they shipping to? AvaTax will compare the address information to the merchant's Nexus configuration.
    -   If the merchant is NOT set up to collect and remit tax in that jurisdiction, then no tax will be calculated. Tax will be zero.
    -   If the merchant is set up to collect and remit tax in the jurisdiction where the transaction is taking place, then AvaTax will continue through the transaction parameters to determine whether tax should be calculated. See the next step.
2.  AvaTax will then read the the customer record and determine whether the customer is exempt.
    -   If the customer is exempt, then no tax will be calculated. Tax will be zero.
    -   If the customer not exempt, then AvaTax will continue through the transaction parameters to determine whether tax should be calculated. See the next step.
3.  AvaTax will now look at each item code and its mapped tax code. Is this item taxable? AvaTax will take into account product taxability rules in determining whether to collect tax.
    -   If the item is not taxable, then no tax will be calculated. Tax will be zero.
    -   If the item is taxable, then AvaTax will calculate tax.

![](https://www.avalara.com/content/dam/assets/ui/screenshots/transaction-taxability.png)

Now that you have a better understanding of how AvaTax reads transactions, the rest of this section describes all the information you need to gather in order to produce accurate, fast, reliable tax calculations. It shows you how to create basic transactions, the information required in each transaction, and the differences between the available document types. Creating transactions is the basis of the AvaTax service, so it’s important to have a solid understanding of the basics.

**Advice:**

-   As you make your way through the Certification Requirements in this section, keep in mind that these requirements are not asking for any additional fields. These requirements are meant to ensure that you are populating those required fields in AvaTax. You must have these elements so that AvaTax can perform tax determination. 
-   You may notice that some parameters are considered optional by the API documentation; however these parameters **are required** for certification. For example if you omit a 'code' in the create transaction request, AvaTax will generate a UUID. However for certification, we are expecting your transaction identifier to be passed in this field.

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