# How the tax on an invoice is chosen

The order QixCount follows to fill in sales tax on an invoice or quote, and what each note on the form means.

Canonical: https://demo.qixcount.com/help/taxes/how-invoice-tax-is-chosen

Who can do this: Owners; *Create invoices* for a new invoice or *Edit invoices* for a draft

Where: Sales, then Invoices

You'll need: Tax turned on in Features; at least one state added on Sales tax

When you choose a customer on an invoice or quote, QixCount fills in a tax on the lines and says why in a note under the addresses. The choice is a starting point: you can still [change the tax on any line](https://demo.qixcount.com/help/taxes/apply-tax-on-invoices).

## The order

QixCount takes the first of these that applies:

| Order | What QixCount checks | Tax filled in |
| --- | --- | --- |
| 1 | The customer is set to **Exempt from sales tax** and a current certificate covers the ship-to state | No tax |
| 2 | The customer is set to **Always use one tax for this customer**, and that tax is active | That tax, whatever the state |
| 3 | You collect in the ship-to state on the invoice date, and the state's default tax is active | The state's default tax |
| 4 | None of the above | No tax |

The ship-to state is the **Ship-to state** on the document. It starts as the state of the customer's shipping address, or the billing address when the customer has no shipping address at all. A customer shipped outside the United States has no ship-to state, even when billed in one.

You collect in a state from its **Collecting since** date until its **Stopped collecting on** date, if it has one. Both are set on [the state's page](https://demo.qixcount.com/help/taxes/add-a-state). The customer's choice is set in the **Sales tax** section of [the customer form](https://demo.qixcount.com/help/invoicing/add-and-edit-a-customer).

If you have not added any state, steps 3 and 4 do not apply. A line then keeps the default tax of its product or service, and a line you type starts with **No tax**.

## Items that are not taxable

A product or service whose **Sales tax** field is set to **Not taxable** gets no tax on its line, whoever buys it. A person can still pick a tax on that line by hand.

## What the note says

| Note on the form | Why |
| --- | --- |
| No sales tax added. Customer is exempt in the state. | Step 1. When you collect in that state, the note adds that the sale is still counted on the state's return as exempt. |
| Sales tax, with the tax's name and rate. This customer always uses this tax. | Step 2. |
| Sales tax, with the tax's name and rate. Filled in because this ships to the state. | Step 3. |
| No sales tax added. You do not collect in the state. | Step 4, for a state that is not on your list or outside its collecting dates, or whose default tax is inactive. |
| No sales tax added. This customer has no state on file. | Step 4, when neither the document nor the customer has a state. **Edit customer** opens the customer for people who can edit customers. |

When an exempt customer is charged tax, a second note says why: the certificate for the ship-to state expired, with the date, or there is no certificate for that state. The second reason is shown only for a state you collect in.

## Good to know

- The same choice is shown on the customer's page and edit form under **What this customer gets**.
- Changing the customer, the ship-to state or the document date fills the lines again. Lines you changed by hand are left as they are.
- A certificate with no states checked under **States it covers** applies in every state.
- When the exemption applies, saving calculates no tax on any line, including a line where a tax is selected.
- **What this customer gets** names the certificate that applies in the customer's own state.
- Converting a quote that was saved exempt chooses the tax again under the certificates current on the day you convert. If its certificate has expired since, the invoice draft is taxed by the order above; if it is still current, the draft is exempt and names it.
- An exempt draft saved before certificates existed names the certificate that covers its ship-to state when it is posted or sent. Its tax is not changed.

This guide explains how QixCount works. It isn't tax, legal or accounting advice.