Is there a taxability connection with the Geographic Hierarchy setting under "Manage Locations"?

Summary:

We are seeing a tax issue where we have 2 different named locations (with the same address) that if one is selected the tax amount populates on a PO/Invoice, and the other does not apply the same tax amount.

The only difference in the set up between the two is that the one that populates the tax amount properly has the Geographic Hierarchy selected in the "Manage Locations" set up (see image below).

What is the connection between this setting and tax?

Why do other locations that have this setting set to blank populate taxes, but the one we are using is not?