Using custom taxonomies to display hierarchical URLs?

I can’t seem to get my custom taxonomy hierarchy working properly. It seems like many other have had this problem but none of their fixes work for me.

I would like to have a URL structure similar to the default category functionality.

Example

http://domain.com/category/sub-category/subsub-category/postname

But it currently works like this

http://domain.com/custom-post-slug/post-name

I would like to be able to have an archive page for each category and sub category with the specified taxonomy. Is this possible? I’ve tried everyones proposed solutions, but nothing seems to work. Any advice?

function social_create_venue_post_type() {

    register_taxonomy("venues",
        array("venues"),
        array(
            "hierarchical" => true,
            "label" => "Venue Type",
            "singular_label" => "Type",
            'rewrite' => array('hierarchical' => true, 'slug' => 'type' )
        )
    );

    register_post_type('venues',
        array(
            'labels' => array(
                'name' => 'Venues',
                'singular_name' => 'Venue',
                'add_new' => 'Add Venue',
                'edit_item' => 'Edit Venue',
                'new_item' => 'New Venue',
                'add_new_item' => 'Add New Venue',
                'view_item' => 'View Venue',
                'search_items' => 'Search Venue',
                'not_found' => 'No Venues Found'
            ),
            'public' => true,
            'has_archive' => true,
            'hierarchical' => true,
            'menu_position' => 5,
            'capability_type' => 'post',
            'supports' => array('title','editor','page-attributes','excerpt','thumbnail'),
        )
    );
}