Exemption Certificates

Using exemption certificates, you can correctly calculate tax on transactions for which part or all of the transaction is tax-exempt. Each exemption certificate:

  • Applies to a particular customer. You can manually create or automatically create customers using exemption certificates as necessary.
  • Is valid in a particular country or related authority type/authority (US and International) or state or related authority type/authority (US only).
  • Is valid for a transaction meeting certain criteria, including a particular product or service.
  • Has an exemption amount or rate associated with the exempted product or service.
  • Can be valid for one or more transactions.
This topic describes:

How Determination Processes Exemption Certificates

When a transaction is processed, Determination checks to see if the company is using exemption certificates (as defined on the Company Preferences page).

If the company uses exemption certificates, Determination determines which Customer Group is relevant to the transaction:

  • If the Input XML contains the <CUSTOMER_GROUP_NAME> and <CUSTOMER_GROUP_OWNER> elements, the search is limited to the specified group.
  • If the Input XML does not contain these elements, the search is limited to the group specified on the company's Company Preferences page. For example:
    • A transaction does not contain the Customer Group Name or Owner elements. The transacting company specifies the active Customer Group of "US Customers (Sample Parent Co)." That group is searched for a customer as shown in the following section.
    • A transaction contains the Customer Group Name "INTL Customers" and Customer Group Owner "ChildCo." The transacting company's active Customer Group is ignored, and the Input XML values are used instead. INTL Customers (ChildCo) is searched for a customer as shown in the following section.

Determination searches for the customer in the active group for the transaction. The customer is specified in the Input XML either by <CUSTOMER_NUMBER> only (default) or <CUSTOMER_NUMBER> and/or <CUSTOMER_NAME>.

Whether or not the Customer Name is used is dependent on the setting of the STRICT_CUSTOMER_LOOKUP Configuration parameter. For example:

  • STRICT_CUSTOMER_LOOKUP is set to Y. The transaction specifies a Customer Number only, or a Customer Number and Customer Name. Only the number is used to match a customer in the active group for the transaction.
  • STRICT_CUSTOMER_LOOKUP is set to N. The transaction specifies a Customer Number, Customer Name, or both. All customer elements present in the transaction must match a customer in the active group for the transaction for that customer to be selected.
  • In either case, if a customer is found, certificates are searched. If one is not found, no certificate matching takes place or the customer is created automatically (see below).

Determination searches for certificates associated with the selected customer. The following input conditions are tested:

  • Exempt reason
  • Certificate number
  • Certificate effective date range
  • Certificate status
  • Limited certificate use criteria

  • Product code criteria list

    If the certificate contains a list of product codes, the exemption only applies to lines that include a product code from the list.

  • Commodity code criteria list

    If the certificate contains a list of commodity codes, the exemption only applies to lines that include a commodity code from the list or lines that include a product code that is mapped to a commodity code from the list.

  • Applicable zones and authorities
  • Currency

At a minimum, a certificate must match the customer, invoice date or certificate date, and ship-to address. As shown above, other data can limit the application of a given certificate to specific transaction(s).

If multiple certificates are found that can apply to a transaction, the first one returned with Approved status is applied.

Determination selects the first exemption certificate found with a valid date range. For this reason, it is important that you end date unwanted certificates; otherwise, you could have unintended results.

For example, if you have two certificates, both starting on January 1st, but the first one has no end date while the second one has an end date of February 15, a transaction on March 15th would be exempt because the first certificate did not have an end date.

If no Approved certificates are found, the first Temporary certificate is applied. Depending on the company preferences you set, Temporary certificates may not affect tax calculation.

Configuring Your Company to Accept Exemption Certificates

Accept exemption certificates

  1. On the Exemptions and Licenses Search page, create a Customer Group to contain customers for whom you will maintain exemption certificates, or select the Default group. If desired, you can create multiple groups, but each exemption or license will only be valid for customers in a single group.
  2. Add Customers to that customer group.
  3. On the Company Preferences page:
    • Specify that Exemption Processing is enabled for this company.
    • Activate the desired Customer Group. While only one group can be specified as active at a given time, transactions can specify which Customer Group to use.

Configuring Your Company to Automatically Create Certificates and Customers

By default, you must manually create both exemption certificates and customers.

You can set up your company to automatically create both customers and certificates based upon input XML conditions:

  • To create certificates automatically, the input XML for a transaction must contain an <EXEMPT_CERTIFICATE> element for the correct zone level at the invoice or line level. This data populates the certificates list for the associated customer. If the customer does not exist, it will be created as shown in the following bullet.
  • To create customers automatically, the transaction data must contain <CUSTOMER_NUMBER> and <CUSTOMER_NAME> data. This data is used when auto-creating a certificate that is not associated with an existing company to create a new company in the customers list. Customers are only automatically created in this scenario; it is not possible to auto-create a customer without auto-creating a certificate.

Consider the following:

  • Automatically created exemption certificates are fully exempt in the ship-to location, and apply to all products. You may need to manually edit these certificates to, for example, change exempt reasons, limit products, or limit the geographical area to which they apply after they are created.
  • If a transaction creates a certificate automatically, the transaction will be calculated twice. The second calculation applies the created certificate to the transaction (as specified by the certificate status), and drops any output XML that would have been returned based on the initial tax calculation. Only the second calculation is audited.
  • An exemption is not created for valid, active unapproved certificates. This gives you a way to prevent some customers from automatically getting exemption certificates.

Configure automatic creation

  1. Open the Company Preferences page for your company.
  2. Select the Auto-Create Customers and Auto-Create Exemption Certificates checkboxes.
  3. Click Submit.

Uploading Customers and Exemption Certificates

Determination provides several ways for you to upload customer and exemption certificate information:

  • Create Customer and Exemption Certificate CSV files to upload data. See Import/Export for more information.

  • Use Certificate Manager.
  • Use Data File Integrator.

  • Create custom code that calls Determination SOAP web services from your financial system.