Set up an Avalara client as a marketplace

From July 2021, marketplaces may become the deemed supplier when they facilitate certain cross-border B2C transactions of their third-party sellers. They will therefore be liable to collect, report, and remit the VAT due from the consumer. While the marketplace takes on the VAT rights and obligations of the sale, they do not take on other obligations, such as product liabilities. This new rule comes into force as part of the e-commerce package of reforms to help simplify VAT compliance and tackle online VAT fraud. For more information, refer to our 2021 EU marketplaces VAT deemed supplier rules and EU 2021 e-commerce VAT package blogs.

This section describes how to set up an Avalara client as a marketplace. This assumes:

The marketplace has merchants who sell their product through their platform.
The marketplace is the facilitator.

For the purposes of this companion guide, we will walk through the setup process for settign up a marketplace in the Sandbox environment. This setup configures a company whose primary address is in the United States. If your company is based outside of the US, the steps will vary slightly. Simply follow the walk-through in the UI, which will guide you through the configuration.

Sign in to your AvaTax Sandbox environment.
1. Check your email for the confirmation you received from Avalara when you signed up for your account.
2. Sign in to your account using the username and link in your confirmation email.
3. Follow the prompts to create a new password.
4. Click I accept to the Terms and Conditions.
Click Get Started to begin the walk-through for adding a company. The first step is to enter your company details. This information is not verified, so technology partners can specify generic information for this test.
1. Specify your business name.
2. If your company is based in the US, then select My company's primary business location is in the US. Otherwise, select your country where your company is located and enter your Business ID number (BIN).
3. Enter your taxpayer ID (EIN).
4. Select the I do business within the European Union check box.
5. Enter your IOSS registration number.
6. If you appointed an IOSS-registered intermediary, then select that check box.
Skip the Is this a standalone company or child company? section. A standalone company is configured by default.
In the Is this an online marketplace? section, select Yes, this company is an online marketplace that connects many sellers to customers on a single platform.
Click Next when you are done.

The next section allows you to specify your company address. Enter a mailing address for your company.
If your company's primary address is in the US or in Canada, validate the address.
Click Next when you are done.
Once you've validated your company's primary address, AvaTax enables tax collection in that jurisdiction. The next step is to add more regions where this company will collect tax.
- If you are not registered to collect sales an use tax in other US regions, click No, this is complete.
- If you are registered to collect sales and use tax in other US regions, add those US regions.
  1. Click Yes, add more US regions, then choose Select from a list.
  2. Enable jurisdictions in locations where you will collect tax. Click Add selected regions when you are done.
  3. For regions where a sales and/or sellers use tax could apply, you will be prompted to specify the type of tax to collect. Click Next when you are done.
When prompted to confirm whether this company is registered to collect and pay tax in other countries, click Yes, add VAT/GST countries.
Select the countries where you will collect VAT, and then click Add selected regions.
Depending on the countries you selected, you may need to select regional collection authorities or adjust international commerce settings.
- Will you include customs duty in transaction calculations?
- Is the company that you're configuring established in that country?
- Will the company that you're configuring be the importer of record on transactions? If so, then,
- Will the company that you're configuring use an import VAT deferment scheme for goods imported into a country?
Review these additional settings and then click Next.
A confirmation page opens. Review your configured tax jurisdictions. If everything looks good, click Done with tax jurisdictions.
Finally, click Activate Company to begin using AvaTax.

Verify your distance selling threshold setting

Effective July 1, 2021, the EU is eliminating the existing country-to-country distance sale threshold and replacing that with a single, 10,000 Euro threshold. Transactions that are dated prior to July 1, 2021 will support any existing country-to-country settings. Transactions dated after July 1, 2021 will use the new checkbox setting.

As a result, the existing AvaTax EU Distance Sale UI will be updated to a single check box to reflect this legislative change. The AvaTax engine by default enables this option, thus assuming that a company has exceeded this threshold for all transactions.

Verify this setting in AvaTax by going to Settings > EU Distance Selling Threshold. This setting is enabled by default. Only change this if your company will not exceed the 10,000 Euro distance selling threshold.