Get Started with Tax Calculation

Prerequisites

Before implementing the tax calculation service, you must know these:

• Tax nexus: Register in every jurisdiction where you are required to pay tax. See Tax Nexus.
• Product codes: Determine if your goods or services need product codes for tax-based rules and exemptions. See Product Codes.
• Address requirements: Understand how the service uses address data to calculate tax. See Address Requirements.
• When to calculate tax: Decide at which point in the transaction you will call the service. See When to Calculate Taxes.

Tax Nexus

When your company has nexus in the US or Canada, you might be required to collect sales tax or sellers use tax in those countries. You can establish nexus in a state or province in various ways. For example:

• Your company has a physical presence in the US or Canada such as office space, warehouse space, paid staff, or inventory.
• Your company sells a sufficiently large volume of goods in the US or Canada to have economic nexus.

Each state and province has its own rules for determining nexus. Consult your tax advisor to determine where you have nexus.

Product Codes

When you request the tax calculation service, you can provide a separate product code for each item in the order. A product code is required to trigger product-based rules and exemptions. When you do not include a product code in your request, or when you include an invalid product code, the tax calculation service assumes that the product has no product-based tax exemptions and is fully taxable.

US and Canadian Tax

Products that are fully taxable in all states do not need a product code because they do not have tax exemption in any state. For tax-exempt products or those with non-standard tax rates, use the product codes in the tax codes guide, which can be requested each month from customer support.

To use a product code that is not listed in the guide, contact customer support for information about how to proceed. Until the product code is supported, you can override the tax amount for the product by sending the amount of tax to apply to the item in the orderInformation.amountDetails.taxAmount field.

International Tax and VAT

For a list of available product codes for international taxes or VAT, see the tax codes guide. For information about these codes, contact customer support.

Address Requirements

The tax calculation service requires specific address information to properly calculate tax.

Multiple Shipping Destinations in a Single Order

You cannot specify a different shipping address for each item in an order. When the order contains multiple items that are going to different addresses, you must send a separate tax calculation service request for each shipping address.

Missing Origin Addresses

The destination address is substituted for the origin address when no origin address or a partial origin address is specified. For the best results, use fully validated origin and destination addresses.

Invalid Address Combination Correction

The tax calculation service performs an implicit address validation; if successful, the entire address is used for tax calculation.

In case the full address validation failed, the engine looks for "Zip + 4" — if it has been provided. If provided, tax is calculated with the "Zip + 4". If "Zip + 4" is not provided or is incorrect, the engine looks for "City & State" or Zip; if either are provided and are accurate, tax is calculated based on these details. If the zip code does NOT lie within the state, then the city and state are used to determine the region for the tax calculation. Note: In certain cases, Zip alone is not enough to accurately determine the jurisdictions; in such cases, the engine looks for additional information — such as Address Lines or City and State. If either is provided and enables identification of the jurisdictions, the successful tax calculation is returned. As Jurisdiction data is in a regular state of change, partial addresses can produce different results over time as the jurisdictions and tax authorities change.

Abbreviations used for some city and county names are acceptable in more than one form. For example, St. Louis is acceptable as Saint Louis, St Louis, and St. Louis. See City Abbreviations.

When to Calculate Taxes

You can calculate tax at these times during the order process:

• When the customer prompts for a subtotal or total.
• When the customer performs a final checkout.
• When the order ships, which ensures that the current tax rate is applied to the order.

Testing

We recommend you test all use cases to ensure the tax engine is calculating taxes as expected before going to production. Contact Customer Support to have your test account set up to return production-level tax rates for short-term testing needs. You will be required to use a production merchant for testing if you have long-term testing needs that require production-level data for ongoing validation.