diff --git a/src/API/Site/Controllers/MerchantCenter/SettingsController.php b/src/API/Site/Controllers/MerchantCenter/SettingsController.php
index e9ffac77e4..64dcad9d0d 100644
--- a/src/API/Site/Controllers/MerchantCenter/SettingsController.php
+++ b/src/API/Site/Controllers/MerchantCenter/SettingsController.php
@@ -130,6 +130,7 @@ protected function get_schema_properties(): array {
 					'destination',
 					'manual',
 				],
+				'default'           => 'destination',
 			],
 			'website_live'            => [
 				'type'              => 'boolean',
diff --git a/tests/Unit/API/Site/Controllers/MerchantCenter/SettingsControllerTest.php b/tests/Unit/API/Site/Controllers/MerchantCenter/SettingsControllerTest.php
new file mode 100644
index 0000000000..f0bc4bcbf0
--- /dev/null
+++ b/tests/Unit/API/Site/Controllers/MerchantCenter/SettingsControllerTest.php
@@ -0,0 +1,47 @@
+<?php
+
+namespace Automattic\WooCommerce\GoogleListingsAndAds\Tests\Unit\API\Site\Controllers\MerchantCenter;
+
+use Automattic\WooCommerce\GoogleListingsAndAds\API\Site\Controllers\MerchantCenter\SettingsController;
+use Automattic\WooCommerce\GoogleListingsAndAds\Options\OptionsInterface;
+use Automattic\WooCommerce\GoogleListingsAndAds\Tests\Framework\RESTControllerUnitTest;
+
+/**
+ * Class SettingsControllerTest
+ *
+ * @package Automattic\WooCommerce\GoogleListingsAndAds\Tests\Unit\API\Site\Controllers\MerchantCenter
+ */
+class SettingsControllerTest extends RESTControllerUnitTest {
+
+	/** @var SettingsController $controller */
+	protected $controller;
+
+	/** @var MockObject|OptionsInterface $options */
+	protected $options;
+
+	protected const ROUTE = '/wc/gla/mc/settings';
+
+	public function setUp(): void {
+		parent::setUp();
+
+		$this->controller = new SettingsController( $this->server );
+
+		$this->options = $this->createMock( OptionsInterface::class );
+		$this->controller->set_options_object( $this->options );
+		$this->controller->register();
+	}
+
+	public function test_default_tax_rate_settings() {
+		$response = $this->do_request( self::ROUTE );
+
+		$this->assertEquals( 'destination', $response->get_data()['tax_rate'] );
+		$this->assertEquals( 200, $response->get_status() );
+	}
+
+	public function test_default_tax_rate_settings_post() {
+		$response = $this->do_request( self::ROUTE, 'POST', [] );
+
+		$this->assertEquals( 'destination', $response->get_data()['data']['tax_rate'] );
+		$this->assertEquals( 200, $response->get_status() );
+	}
+}