<commit_before>---
title: Taxation
section: core
---

# Overview

Spree represents taxes for an order by using `tax_categories` and `tax_rates`.

Products within Spree can be linked to Tax Categories, which are then used to influence the taxation rate for the products when they are purchased. One Tax Category can be set to being the default for the entire system, which means that if a product doesn't have a related tax category, then this default tax category would be used.

A `tax_category` can have many `tax_rates`, which indicate the rate at which the products belonging to a specific tax category will be taxed at. A tax rate links a tax rate to a particular zone (see [Addresses](addresses) for more information about zones). When an order is placed in a specific zone, any of the products for that order which have a tax zone that matches the order's tax zone will be taxed.

The standard sales tax policies commonly found in the USA can be modeled as well as Value Added Tax (VAT) which is commonly used in Europe. These are not the only types of tax rules that you can model in Spree. Once you obtain a sufficient understanding of the basic concepts you should be able to model the tax rules of your country or jurisdiction.

***
Taxation within the United States can get exceptionally complex, with different states, counties and even cities having different taxation rates. If you are shipping interstate within the United States, we would strongly advise you to use the [Spree Tax Cloud](https://github.com/bluehandtalking/spree_tax_cloud) extension so that you get correct tax rates.
***

## Tax Categories

The Spree default is to treat everything as exempt from tax. In order for a product to be considered taxable, it must belong to a tax category. The tax category is a special concept that is specific to taxation. The tax category is normally never seen by the user so you could call it something generic like "Taxable Goods." If you wish to tax certain products at different rates, however, then you will want to choose something more descriptive (ex. "Clothing.").<commit_msg>Use spree-contrib Spree::TaxCloud repository<commit_after>---
title: Taxation
section: core
---

# Overview

Spree represents taxes for an order by using `tax_categories` and `tax_rates`.

Products within Spree can be linked to Tax Categories, which are then used to influence the taxation rate for the products when they are purchased. One Tax Category can be set to being the default for the entire system, which means that if a product doesn't have a related tax category, then this default tax category would be used.

A `tax_category` can have many `tax_rates`, which indicate the rate at which the products belonging to a specific tax category will be taxed at. A tax rate links a tax rate to a particular zone (see [Addresses](addresses) for more information about zones). When an order is placed in a specific zone, any of the products for that order which have a tax zone that matches the order's tax zone will be taxed.

The standard sales tax policies commonly found in the USA can be modeled as well as Value Added Tax (VAT) which is commonly used in Europe. These are not the only types of tax rules that you can model in Spree. Once you obtain a sufficient understanding of the basic concepts you should be able to model the tax rules of your country or jurisdiction.

***
Taxation within the United States can get exceptionally complex, with different states, counties and even cities having different taxation rates. If you are shipping interstate within the United States, we would strongly advise you to use the [Spree Tax Cloud](https://github.com/spree-contrib/spree_tax_cloud) extension so that you get correct tax rates.
***

## Tax Categories

The Spree default is to treat everything as exempt from tax. In order for a product to be considered taxable, it must belong to a tax category. The tax category is a special concept that is specific to taxation. The tax category is normally never seen by the user so you could call it something generic like "Taxable Goods." If you wish to tax certain products at different rates, however, then you will want to choose something more descriptive (ex. "Clothing.").
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