Address information required to calculate tax

Introduction

Address details are essential for calculating tax on your transactions, especially when dealing with different tax rates in different jurisdictions. When you’re just starting to collect sales tax, you might have some questions about the address information you need to calculate tax on a transaction.

Minimum address information required

Given that certain states and most countries have a single tax rate on SaaS, while other states and a few countries have multiple jurisdictions with each having its own tax rates, you must include accurate address information on your transactions. Without a valid address, you may receive an incomplete assessment of your exposure profile and an increased risk at the time of audit.

In the US, Canada, and India we require zip/postal code and country code to calculate tax. In all other global jurisdictions that we support, we only require country code. While these are the minimum requirements for address information, we do recommend collecting a full address from customers for tax purposes. There are some cases where a full address provides a more accurate tax calculation than a partial address, especially in cases where one zip/postal code can resolve to multiple taxable jurisdictions. In the US, 9-digit zip codes provide more precision in determining locations.

We expect to have more invalid addresses at the historical onboarding step of the journey. Finance leaders may not have previously understood that collecting addresses was important for compliance. Onboarding to Anrok tends to be a moment when users want to get their data hygiene in order retrospectively and fix addresses in past transactions.

Address standardization process

Each time you create an invoice in your billing system, Anrok receives an “input address” as text data. To determine the taxability of an address, Anrok standardizes and resolves this input address so that Anrok can retrieve the relevant tax rules from its system. During standardization, Anrok may make necessary modifications to clarify the address's taxability implications, such as filling in a ZIP+4 code if one is not provided or correcting a typographical error in a street name.

For example, when you create an invoice in your billing system, the input address's text data might look like this:

{
"address": {
"city": "San Francisco",
"line1": "3601 Lyon St",
"region": "California",
"country": "United States",
"postalCode": "94123"
},

Once Anrok receives the text data, Anrok will standardize the address by filling in the ZIP+4 code to determine its taxability. This address will appear as a Resolved address, as seen below:

Anrok will work to ensure that the addresses you provide from your billing system are standardized and resolved to ensure they are in order. This will allow Anrok to calculate the tax for your transaction with the utmost accuracy.