> ## Documentation Index
> Fetch the complete documentation index at: https://docs.sequencehq.com/llms.txt
> Use this file to discover all available pages before exploring further.
# Managing sales tax
> Configure sales tax rates by region and apply them to your invoices
With Sequence, you can manage sales tax on your invoices. Add tax rates by region, including individual US states, and Sequence applies them to each invoice based on the product's tax category, the customer's region and their tax status. You don't need a third-party tax engine to charge tax on your invoices.
If you need tax calculated at a more granular level, such as by ZIP code, or you'd rather automate rate maintenance and filing, you can [connect a tax engine](#automating-tax-calculation-with-a-connector) instead. To manage tax status per customer, including tax registration IDs, see [tax status](/tax/tax-status).
### How tax is applied
Sequence applies tax to each invoice line based on three things:
* **Tax category**: the category assigned to the product, which lets you charge different rates for different types of good
* **Customer region**: the customer's region, so the rate you set for that region applies (for example, a specific US state)
* **Tax status**: whether the customer is taxable, tax exempt or reverse charged
You configure the rates once per region and category, and Sequence applies them as you bill.
### Create and manage tax categories and rates
Go to Settings > Sales tax to manage tax categories and tax rates.
Tax categories are assigned to products and let you charge different tax rates depending on the type of good sold. For example, you may charge a different rate on your subscription fee than on your implementation service.
When you create a new tax category, you can optionally provide tax rates for each region you have already configured.
When you add a tax rate for a region, you can optionally provide a rate for each category. Regions can be countries or individual US states, so you can set state-level rates for the places you sell into and Sequence applies the right one automatically.
### Assigning or updating product tax categories
Go to the product catalogue and select a product to update its tax category. You need to recalculate any draft invoices for a product tax category change to take effect.
### Charging sales tax
When you create a billing schedule for a taxable customer, Sequence looks up whether you have provided a tax rate for the customer's region.
If no tax rate has been configured for that region, Sequence prompts you to add one. If you skip this step, you can still add the rate later.
Once the rate is set, Sequence applies it to invoices automatically going forward.
The invoice below includes tax based on the product's tax category, the customer's region and their tax status.
### Automating tax calculation with a connector
Setting rates yourself is enough to charge tax anywhere, including across US states. We recommend connecting a tax engine when you need tax determined at a more granular level than you want to maintain by hand, for example down to ZIP code, or when you need automated tax filing. The connector then calculates the tax on each invoice and keeps rates current for every jurisdiction.
* [Anrok](/connectors/anrok): calculate, apply and record sales tax, with filing-ready records
* [Sphere](/connectors/sphere): calculate and apply tax with two-way customer and product sync
* [Numeral](/connectors/numeral): calculate tax and handle automated return filing
* [Avalara](/connectors/avalara): calculate tax with built-in address validation
If you charge tax at a regional or state level, we recommend managing your rates directly in Sequence. Connect a tax engine when you need tax determined at a more granular level, such as by ZIP code, or you want automated filing.
### Frequently asked questions (FAQ)
Add a tax rate for each region you sell into, including individual US states, under Settings > Sales tax. Sequence applies the rate you've set to every invoice based on the product's tax category and the customer's region, so you don't need a third-party tax engine to bill US customers.
If you need tax determined at a more granular level, such as by ZIP code, or you need automated filing, [connect a tax engine](#automating-tax-calculation-with-a-connector).
You can either mark the customer as tax exempt, or set up a 0% tax rate for the customer's region in the product's tax category.
Go to Settings > Sales tax and select the tax rate or category you want to update. You will need to recalculate any draft or upcoming invoices for the change to take effect.
Go to the customer's page in Sequence and select `Edit`, then update the customer's tax status. You will need to recalculate any draft or upcoming invoices for the change to take effect. See [tax status](/tax/tax-status) for more detail.
To show your customer's Tax or VAT ID, go to the customer's page in Sequence, select `Edit` and add a tax ID. Recalculate any draft or upcoming invoices for the change to take effect. To show your own company's Tax or VAT ID on invoices, get in touch with a member of the team.
When you create a credit note for an invoice, each credit line inherits the tax rate on the original invoice. If you create a credit note from scratch, you provide a tax rate for each credit line.
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