openinvoice-docs
Tax Management

TaxJar Setup

Set up automatic tax calculation with TaxJar

Overview

TaxJar provides automatic tax calculation based on customer and business addresses. This ensures accurate tax calculation without manual configuration.

Prerequisites

  • TaxJar account (sign up here)
  • TaxJar API token
  • Business address configured
  • Nexus regions configured (if applicable)

Setting Up TaxJar

Step 1: Get TaxJar API Token

  1. Log in to TaxJar Dashboard
  2. Go to Account → API Access
  3. Copy your API token
  4. Keep it secure

Step 2: Configure in OpenInvoice

  1. Go to Settings → Tax
  2. Enable TaxJar Integration
  3. Enter your TaxJar API token
  4. Select Sandbox Mode (for testing) or Production Mode
  5. Save settings

Step 3: Configure Nexus Regions

Set up nexus regions (where you have tax obligations):

  1. In TaxJar Dashboard, go to Nexus Regions
  2. Add your nexus regions
  3. Regions sync to OpenInvoice automatically

Step 4: Configure Business Address

Ensure business address is set:

  1. Go to Settings → Branding
  2. Verify company address
  3. Address is used for tax calculation

How TaxJar Works

Automatic Calculation

When creating an invoice:

  1. Customer address is provided
  2. TaxJar calculates tax based on:
    • Customer location
    • Business location
    • Nexus regions
    • Product tax codes
  3. Tax amount is calculated automatically
  4. Added to invoice total

Tax Calculation Priority

TaxJar is checked first in the tax calculation priority:

  1. TaxJar (if enabled) - Automatic calculation
  2. Tax Overrides - Manual tax rates
  3. Tax Profiles - Custom tax rules
  4. Manual - Item-level tax rates

TaxJar Features

Real-Time Calculation

  • Calculates tax in real-time
  • Uses current tax rates
  • Accounts for rate changes
  • Handles special tax situations

Multi-Jurisdiction Support

Supports:

  • United States - State and local taxes
  • Canada - GST, PST, HST
  • European Union - VAT
  • International - Various tax types

Product Tax Codes

Set product-specific tax codes:

  1. Edit product
  2. Set Tax Code
  3. TaxJar uses code for calculation
  4. Handles exempt items, reduced rates

Address Validation

  • Validates customer addresses
  • Parses address components
  • Ensures accurate calculation
  • Handles international addresses

Sandbox Mode

Testing with Sandbox

Use sandbox mode for testing:

  1. Enable Sandbox Mode in settings
  2. Use sandbox API token
  3. Test tax calculations
  4. Verify results

Sandbox Limitations

  • Test data only
  • Not for production
  • Limited functionality
  • For development/testing

Tax Transaction Tracking

TaxJar transactions are tracked:

  • Transaction ID - TaxJar transaction ID
  • Tax Amount - Calculated tax
  • Tax Rate - Applied tax rate
  • Jurisdiction - Tax jurisdiction

Troubleshooting

Tax Not Calculating

  • Check TaxJar API token
  • Verify API key is correct
  • Check sandbox vs production mode
  • Verify addresses are complete

Incorrect Tax Amount

  • Check nexus regions
  • Verify business address
  • Check product tax codes
  • Review TaxJar dashboard

API Errors

  • Check API rate limits
  • Verify API token validity
  • Check network connectivity
  • Review error messages

Best Practices

  1. Test First - Use sandbox mode for testing
  2. Verify Addresses - Ensure addresses are complete
  3. Monitor Transactions - Review tax calculations
  4. Keep Updated - Update nexus regions as needed
  5. Backup Plan - Have fallback tax profiles

Next Steps

Subscription Management

Manage recurring invoices and subscriptions

Custom Tax Profiles

Create custom tax profiles for manual tax calculation