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Avalara Releases AI-Powered Tax Classification Tool for AvaTax


Avalara Inc., a provider of cloud-based tax compliance automation, has made available its artificial intelligence (AI)-based tax classification tool designed to reduce the time spent classifying products and taxability.

Jun 17th 2020
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Avalara's new AI tool specifically allows Avalara AvaTax users to quickly and efficiently classify their products or services to aid in taxability determinations for their U.S. domestic product catalogs.

Determining Taxability Poses Challenges for Businesses

There are currently more than 13,000 tax jurisdictions in the U.S. alone and many have their own unique set of rules when it comes to how products and services are taxed. As such, determining the taxability for products or services is one of the more intricate and time-consuming parts of tax compliance.

The complexity of accurate tax determination lies in knowing details about a product or service, such as its ingredients, how it’s sold, where it’s sold, how it’s delivered, and more. Nearly every state has a unique approach to defining the taxability of products.

For example, in California, when a grocery store sells cold food items and individual hot drinks to go state sales tax does not apply, while vending machine sales of cold food products and hot drinks are taxable. Ensuring products are accurately classified is critical to achieving tax compliance and makes certain businesses aren’t over- or undercharging taxes on transactions.

Gaining Control of Tax Determinations

Avalara’s AI-driven tool helps users determine the right tax code in AvaTax for a product or service by using simple search terms and an easy, interactive Q&A experience. This enables businesses to:

Improve accuracy of tax classification across channels. Users can answer contextual questions to easily determine the correct tax codes for products, which reduces confusion and inaccuracy throughout the classification process.

Decrease turnaround time for product classification. AI streamlines the product classification process, reducing the time needed to consult human tax experts. If a customer still needs support, Avalara’s GoLive and customer support teams are trained to leverage the new tool to streamline product classification for customers.  

For additional information on Avalara’s AI-enabled tax classification solution, please click here.

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