# Set up a hierarchy of subsidiary companies

Source: https://developer.avalara.com/avatax-for-vat/mqx0533175203026/

# Set up a hierarchy of subsidiary companies

If your business operates multiple legal entities or VAT group structures, set up a company hierarchy in AvaTax. This allows you to organize related companies in a parent-child structure. It also maintains appropriate reporting relationships.

For detailed setup instructions, see [Set up a hierarchy of subsidiary companies](https://knowledge.avalara.com/bundle/dqa1657870670369_dqa1657870670369/page/spg1717580273520.html).

## Business scenarios for using company hierarchy

Use a company hierarchy when:

-   Your organization includes subsidiaries under a parent company.

-   Different entities file separate tax returns.

-   A legal entity must track and report its transactions.

-   Your source system uses multiple company identifiers.

## Integration considerations

Each company in the hierarchy:

-   Has its own **company code**.

-   Maintains independent tax settings and reporting.

-   Must receive the correct `companyCode` in transaction requests.

If you don't specify a company code, AvaTax uses the default company profile.

Hierarchy configuration organizes companies but doesn’t merge tax liabilities across entities.

## Marketplace configuration considerations

For marketplace integrations, hierarchy may be used when:

-   The marketplace and sellers are represented as separate entities.

-   Tax responsibility differs by jurisdiction or entity.

Ensure your integration routes transactions to the appropriate company profile based on tax responsibility rules.