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This reference explains how sales tax works in product terms: where the rate comes from, what it’s applied to, what gets saved with an estimate or invoice, and how older records are handled. Sales tax is always a choice made on the estimate or invoice. Your workspace keeps its own list of tax rates and tax groups, and your team picks one in the tax selector. There’s no automatic rule based on the state a job is in — an order is taxed when a tax is selected, and isn’t when No Tax is.

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Where a rate comes from

The tax selector offers these choices, scoped to the estimate’s or invoice’s branch: Only active rates and groups that are assigned to the branch appear. Admins set rates and groups up on the Taxes settings page. Admins, Ops Managers, Sales Admins, and Sales Members can also add a rate with Create new. A rate you create there is selected for you once it’s assigned to that branch and active. For how TaxJar finds a rate, see TaxJar.

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The tax applied automatically

Some records get a tax picked for you when they’re created:
  • New estimates in the Calculator and estimates built from scratch get the branch’s default rate.
  • New invoices you create from scratch get the branch’s default rate too.
  • On a branch that uses TaxJar, TaxJar is picked instead of the default rate.
If the branch has no default rate and doesn’t use TaxJar, nothing is picked and the record starts with no tax. You can change the automatic choice at any time.

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How tax is calculated

Tax = taxable amount × rate

Tax is the taxable amount multiplied by the rate’s percentage, rounded to the cent. For a tax group, the percentage is the sum of the rates in the group.
What counts as the taxable amount depends on how the estimate was built:
  • Calculator estimates — the final price after any discount, counting only the items marked Taxable Item in your price book. Estimates saved before items could be marked taxable are taxed on the whole final price.
  • Estimates built from scratch — the subtotal of the lines marked taxable, after discounts.
Items that aren’t taxable are left out, so the rate applies only to the taxable part of the job. See Items for the Taxable Item setting. On proposals and invoices, the tax shows as one line named after the rate, for example “Tax · King County (10.1%)”.

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The saved copy of the rate

When a tax is applied, the estimate saves a copy of the rate’s name and percentage along with the tax amount. That copy is what the proposal shows and what invoices are built from. So if you later edit, deactivate, or delete the rate in settings, estimates that already use it don’t change on their own — the tax selector still shows the saved name and percentage. The tax is worked out again, using your current rates, when:
  • You pick a tax in the selector — in the Calculator, or on the proposal while the estimate is In Progress and the proposal isn’t signed.
  • You save the estimate again in the Calculator with a tax selected.
  • You refresh the estimate’s pricing. The tax follows the new total.
Editing the lines of an estimate built from scratch also recalculates the tax, but keeps the saved percentage.

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Older estimates

Estimates taxed before tax rates existed have a stored tax amount but no saved rate. They keep that amount:
  • Saving them without choosing a tax, or refreshing their pricing, leaves the stored tax as it is.
  • Their read-only proposal still shows the original Local Tax and State Tax lines.
  • If you reopen one in the Calculator on a branch that uses TaxJar, and TaxJar finds a rate for the property, the tax switches to TaxJar and is recalculated. Otherwise the stored amount stays.

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Tax on invoices

Invoices from an estimate carry its tax

An invoice created from an estimate uses the estimate’s saved rate, and the tax shows as a read-only line. To change it, change the tax on the estimate. Trying to change it on the invoice shows “Tax on an estimate-based invoice is changed on the estimate.”
  • Per-line tax. Each taxable line is taxed at the rate on its own amount after discounts, and non-taxable lines get no tax. A custom line that isn’t linked to a price book item counts as taxable.
  • Older estimates without a saved rate. The estimate’s stored tax amount is spread across the taxable lines in proportion to their amounts, and shown as a single “Tax” line. That way the invoice still matches the proposal the customer accepted.
  • Billing part of the job. When you customize the amount due, the tax is recalculated on the smaller amounts.
  • Deposit invoices. The invoice created automatically when a proposal is signed taxes the deposit amount at the estimate’s saved rate. If the estimate has no saved rate, the deposit has no tax.
  • Invoices created from scratch have their own tax selector, with the branch’s default rate (or TaxJar) picked for you. While the invoice is a draft, you can switch to any rate, group, TaxJar, or No Tax. See Create an invoice.

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When an order has no tax

An estimate or invoice ends up with no tax when:
  • No Tax is selected, or nothing was picked and the branch has no default rate.
  • None of the items or lines are taxable.
  • TaxJar is selected but couldn’t find a rate for the address — for example, the property has no ZIP code. See TaxJar for how each screen handles this.

There is no tax-exempt setting

There’s no “tax exempt” flag on a client or invoice. For an exempt job, choose No Tax.

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Quick reference

  • Tax is a choice made in the tax selector: a saved rate, a tax group, TaxJar (where a branch uses it), or No Tax. There’s no state-based rule.
  • The selector shows active rates and groups assigned to the branch.
  • Defaults: new estimates and new from-scratch invoices get the branch’s default rate, or TaxJar on branches that use it.
  • Tax = taxable amount × rate, rounded to the cent. Only taxable items count.
  • Estimates keep a saved copy of the rate’s name and percentage. Settings changes don’t touch them until the tax is applied again.
  • Older estimates keep their stored tax unless a new tax is chosen.
  • Invoices from an estimate carry its tax read-only. Invoices from scratch can pick their own.