Hello!
We are trying to specify taxes based on locationId for the transactions happening for our business. We’ve specified a Sales Tax rule and can retrieve it via the Catalogue API
From our research it doesn’t seem like you can specify a tax rate on Payments via the Payments API. The only place we’ve found it’s possible to create a tax rate is via the Orders API. We’re trying to avoid creating Orders to avoid any potential rate limiting we may run into in addition to our back-off strategy.
I wanted to confirm whether our understanding is correct here. 
The other alternative we’ve found is creating a catalogue for every item that our business sells and specifying Sales Tax rules per location. Current our business does not have items, so from the looks of it the rules do not get applied as they’re not tied to an item, even if the location matches:
[..] apply the tax to ALL ITEMS IN YOUR LIBRARY [..]
Thank you in advance!
You’re understanding is correct. Currently, taxes can only be applied to order prior to payment processing. If you have the recommended backoff strategy you should very rarely run into rate limiting given that we recommend creating an order then paying for the order. 