---
title: Tax Rate vs Tax Code
description: imrchnt knowledge base
---
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# Tax Rate vs Tax Code
**Each tax rate is defined by a Tax Code.**
- Think of it this way: There is a general Tax Area; then, within that Tax Area, there are Tax Codes.
- You can create as many rows (Tax Codes) under these fields as you want, but often, you will only need one.
- The first row is the default tax rate for the Tax Area you are defining.
- So, for Vermont, the first row is simply the Vermont sales tax.
- Any additional rows are for exceptions.
- Let's say you live in a state where clothing is not taxed, or where alcohol is taxed higher than the standard item.
- These would be exceptions to the standard state tax.
- You establish an item's Tax Code in that item's [Product Properties](http://www.computac.com/imhelp/Merchant/Inventory/Product_Properties.htm) program.
- IMRCHNT will then know which items are exceptions to the general tax rate.
[](https://media.screensteps.com/image_assets/assets/004/833/095/original/taxareavstaxrate.PNG)
Also here is a bit more details on the Tax Rates and Tax Codes.
[https://imrchnt.screenstepslive.com/s/17626/a/807248-tax-area#create-a-new-tax-area-code](https://imrchnt.screenstepslive.com/s/17626/a/807248-tax-area#create-a-new-tax-area-code)
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