# Set up and manage tax settings
## **Overview**
Caspen allows you to define and manage tax rates that are applied to invoices, services, activities, classes, and products.
You can:
* Create your own tax rates list.
* Choose how tax is calculated (prices include or exclude tax).
* Apply specific tax rates to items in your catalog.
System tax rates may already exist depending on your region. These system-created rates cannot be edited or deleted, but you can create additional custom tax rates as needed.
***
## **Create and manage your tax rates list**
### **Add a tax rate**
Depending on your location, Caspen automatically provides a pre-set list of tax rates (e.g., GST, VAT, etc.).\
If you need to add another tax rate, follow these steps:
1. Go to **Settings** → **Taxes**.
2. Click **Add tax**.
3. Enter the name, rate (e.g., 15%), and description (optional).
4. Click **Create**.
Your new tax rate will appear in the **Tax Rates** list and can be selected when creating or editing invoices or catalog items.
### **Edit a tax rate**
You can edit only the tax rates that you have created in Caspen.
1. Go to **Settings** → **Taxes**.
2. Find your custom tax rate.
3. Click **Actions** → **Edit**.
4. Make your changes and click **Save**.
> **Note:** System-created tax rates cannot be edited.
### **Archive a tax rate**
1. Go to **Settings** → **Taxes**.
2. Find the tax rate you want to archive.
3. Click **Actions** → **Archive**.
4. The tax rate will move to the **Archived** tab and will no longer be available for selection.
To restore an archived tax rate, open the **Archived** tab, find the rate, and click **Actions** → **Restore**.
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## **Set the tax usage on invoices**
A system-wide setting determines how taxes are applied to all invoices in Caspen.
**To set your tax calculation preference:**
1. Go to **Settings** → **Taxes**.
2. Click **Edit settings**.
3. Choose one of the following options:
**Prices exclude tax**
If selected, tax is added **on top** of your prices.
**Formula:**\
`Item Tax = Price * Tax`
**Example:**
* 20% tax on a $10.00 item comes to **$2.00**.
* The total becomes **$12.00**.
**Prices include tax**
If selected, tax is already **included** in your prices.
**Formula:**\
`Item Tax = (Tax * Price) / (1 + Tax)`
**Example:**
* 20% tax on a $10.00 item comes to **$1.67**.
* The total remains **$10.00** (including tax).
4. Once you’ve chosen your preferred setting, click **Save**.
> **Tip:** This setting applies to all invoices you create for clients. If you change it later, future invoices will use the new method automatically.
***
## **Apply tax rates to catalog items**
You can assign specific tax rates to individual **services**, **activities**, **classes**, or **products** in your catalog.
**Steps:**
1. Go to **Catalog →** select **Services**, **Activities**, **Classes**, or **Products**.
2. Add a new item, or find an existing one and click **Actions** → **Edit**.
3. In the **Tax rate** dropdown, select the tax rate that applies to this item.
4. Click **Save**.
> **Hint:** Repeat this for every item your business offers in your catalog to ensure accurate tax calculations across all invoices.
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