Avatax, as an addon, works as a connector between SAP and Avalara, being so, "Avatax" (red square) as tax code is a trigger code that sends the order to be calculated. 
If you don’t have that taxcode on any line then the add-on will consider you don’t want to calculate taxes using Avatax. Calculation is ALWAYS performed by Avalara.
All of the items you'll send, have an AvaTax Tax Code defined (in case you haven't specified one, Avalara will fill in with a default one - green square). This data represent what kind of product are you sending.

You can find a complete list of the existing codes at: https://taxcode.avatax.avalara.com/ Beside, you can define your own codes (check with your Avalara Account Manager). If you have defined your own codes:

• You can set up those in the UDF window, within the Item Master Data or at Item Group Code level (once the addon is installed)

• Or you can set up those in your Avalara portal by creating the necessary rules. Go to: Settings - Manage What you Sell. (Please check with your Avalara Account Manager on how to create those rules)