Prerequisites for Tax Calculation
Before implementing the tax calculation service, you must know the following:
- Where your business is required to pay tax, and register there. See Tax Nexus.
- Whether any products require special product codes for tax purposes. See Product Codes.
- The correct address information. See Address Requirements.
- When to calculate tax in your check out flow. 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 haveeconomicnexus.
Each state and province has its own rules for determining nexus. Consult your tax advisor to determine where you have nexus.
In your tax calculation service request, specify the states in which you have nexus by
populating the
taxService_nexus
and taxService_noNexus
API fields. When you do
not include one of these fields in a tax calculation service request, the tax system makes
its calculations as if you have nexus in every state.For more information, see Step 1: 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 in order 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.
To use a product code that is not listed in the available guides, contact customer support for information about how to proceed.
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
Cybersource
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
purchaseTotals_taxAmount
field.For more information, see Step 2: Product Codes.
International Tax and VAT
For a list of available product codes for international taxes or VAT, see the
Cybersource
tax codes guide. For information about these codes, contact customer
support. Address Requirements
The tax calculation service requires specific address information be provided in order to
properly calculate tax. This section goes over how the tax calculation service uses
address information to calculate tax.
There is additional address related information in the US and
Canada section that explains specific request fields. See US and Canadian Addresses.
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, 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, 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, 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 check out.
- When the order ships, which ensures that the current tax rate is applied to the order.
As you determine how and where to implement the Tax Calculation Service on your website,
consider that the Global Tax Calculation Service is billable for each request. To offset
your costs and optimize your pricing, consider waiting to request a tax calculation until
after your customer has entered their shipping or billing address on the checkout page. This
minimizes the number of tax calculation requests for a single transaction. To ensure that
your business complies with tax laws, work with a tax advisor to determine when to calculate
tax.
For more information on when to calculate US and Canadian taxes, see Step 4: When to Calculate Tax.