Set up Automatic Tax Calculation

Set up Automatic Tax Calculation by completing the steps below. Once configured, Billing automatically calculates and applies the correct indirect tax on your new invoices, subscriptions, and eligible checkout flows.

Before you begin

You'll need:

• Billing admin access to the Airwallex web app.
• A clear list of jurisdictions where you're registered to collect tax, for example AU, UK, EU countries, and US states.
• A basic understanding of your product types (SaaS, digital media, professional services, and so on) so you can assign the correct tax categories.

For background on how Automatic Tax Calculation works, see How Automatic Tax Calculation works.

Step 1: Enable global tax automation

1. Sign in to the Airwallex web app.
2. Navigate to Billing Settings > Tax.
3. Switch Enable global tax automation to ON.

When enabled, new invoices, subscriptions, and eligible Hosted Billing Checkout flows attempt to calculate tax automatically by default. You can always override tax manually at the invoice or line-item level.

Step 2: Add your tax registrations

Tell Billing where you're registered to collect tax. Add one registration for each jurisdiction where you have tax obligations.

1. In Billing Settings > Tax, find the Tax registrations section.
2. Click Add registration.
3. Select the Country (for example, Australia, Germany, or United States).
4. Select the State or province, if applicable (for example, California or New York).
5. Click Save.

Repeat for each jurisdiction where you have obligations.

You can later update a registration's end date if you deregister, or add new registrations as your business expands.

For more information on registrations and nexus, see Tax registrations and nexus.

Step 3: Assign tax categories to your products

Each product used on an invoice or subscription needs a tax category so that Billing knows which tax rules and rates to apply.

1. Go to Billing > Products.
2. Open a product.
3. Find the Product Tax Category field.
4. Choose the most appropriate category using the label and description.
5. Save the product.

Repeat for each product in your catalog. For a full list of available categories, see Tax categories.

Step 4: Configure tax inclusion behavior

For each of your prices, configure whether the price is tax inclusive or tax exclusive.

1. Go to Billing > Products and open a product.
2. Open a price on that product.
3. Set Tax inclusion to one of the following:
   • Tax inclusive: Use when your prices are advertised inclusive of VAT or GST.
   • Tax exclusive: Use when your prices are pre-tax and tax is calculated and added on top.
4. Save the price.

You can adjust this setting later, but it affects how tax is calculated for transactions after you save the change.

Step 5: Ensure customers have valid billing addresses

Automatic Tax Calculation needs a usable customer location to determine the correct jurisdiction.

1. Go to Billing > Customers.
2. Open a customer record.
3. Under Billing address, fill in:
   • Street address
   • City
   • State or province (where relevant)
   • Postal or ZIP code
   • Country

Most regions only require the country to accurately calculate tax. For some regions such as the US and Canada, a valid postal or ZIP code is required to calculate accurate local rates.

Billing determines whether a customer is treated as B2B or B2C from the customer type:

• If the customer type is business, Billing treats that customer as B2B for tax calculation purposes.
• If the customer type is individual, Billing treats the customer as B2C by default.

If the address is missing or the postal code is invalid when you finalize an invoice or create a subscription, you'll see an error with two options:

• Add address: Opens the address editor.
• Switch to manual tax: Allows manual rate entry for that line.

Step 6: Test your setup with a sample invoice

Before using Automatic Tax Calculation in production, verify your setup with a test transaction.

1. Create a test customer using a region where you know the expected tax outcome, for example, a specific US state or EU country.
2. Create a test product and assign a clear tax category, for example, SaaS – Business.
3. Create a new invoice:
   • Set the test customer as the bill-to.
   • Add a line item using the test product.
4. Verify that:
   • Automatic tax is enabled on the line item.
   • The tax rate and amount match the expected local rule.
   • The invoice PDF and customer email show the correct tax details.

If results don't match expectations, check the following:

• Is Enable global tax automation ON?
• Do you have a tax registration covering the customer's jurisdiction?
• Does the product have a tax category assigned?
• Is the customer's billing address complete and valid?