Sovos tax codes consist of two letters representing the country code and six digits, such as "DE110001". The tax codes are the same for all countries, with the country code determining the country in which the transaction will be filed.

When the country code comes before the numbers (e.g., "DE110001"), it is a purchase tax code. When the country code comes after the numbers (e.g., "110001DE"), it represents sales transactions. The two-letter country code follows the ISO 3166 Alpha-2 code standard, which is part of the ISO 3166 standard published by the International Organization for Standardization (ISO) — a non-governmental group that develops and publishes international standards.

In the EU, the reverse-charge mechanism shifts the responsibility of paying VAT from the seller to the buyer for certain goods or services. Consequently, the buyer is accountable for reporting and remitting VAT on both the purchase and the sale. This means that the VAT is self-assessed and both the input and output VAT are directly reported to the relevant tax authority, under the same VAT Filing.

Sovos has a specific set of Sovos tax codes for reverse-charge transactions that ensure the independent tracking and reporting of both the input and output VAT from these transactions, as required for each jurisdiction's specific VAT reverse-charge rules.