diff --git a/app/DataMapper/Tax/BaseRule.php b/app/DataMapper/Tax/BaseRule.php
index a184f2ac211b..136fbf0bfcea 100644
--- a/app/DataMapper/Tax/BaseRule.php
+++ b/app/DataMapper/Tax/BaseRule.php
@@ -147,8 +147,6 @@ class BaseRule implements RuleInterface
 
         $this->configTaxData();
 
-        nlog($this->invoice->tax_data);
-
         $this->tax_data = new Response($this->invoice->tax_data);
 
         return $this;
diff --git a/app/DataMapper/Tax/US/Rule.php b/app/DataMapper/Tax/US/Rule.php
index 9538a4f3085e..4a4527057b9f 100644
--- a/app/DataMapper/Tax/US/Rule.php
+++ b/app/DataMapper/Tax/US/Rule.php
@@ -129,6 +129,7 @@ class Rule extends BaseRule implements RuleInterface
      */
     public function taxShipping($item): self
     {
+
         if($this->tax_data?->txbFreight == 'Y') {
             $this->default($item);
         }
@@ -144,6 +145,8 @@ class Rule extends BaseRule implements RuleInterface
      */
     public function taxPhysical($item): self
     {
+        nlog("tax physical");
+        nlog($item);
         $this->default($item);
 
         return $this;
diff --git a/app/Utils/Traits/CleanLineItems.php b/app/Utils/Traits/CleanLineItems.php
index 921f66c32e1b..19938c0dce0b 100644
--- a/app/Utils/Traits/CleanLineItems.php
+++ b/app/Utils/Traits/CleanLineItems.php
@@ -66,7 +66,12 @@ trait CleanLineItems
                 $item['tax_id'] = '1';
             }
             elseif(array_key_exists('tax_id', $item) && $item['tax_id'] == '') {
-                $item['tax_id'] = '1';
+                
+                if($item['type_id'] == '2')
+                    $item['tax_id'] = '2';
+                else 
+                    $item['tax_id'] = '1';
+                
             }
             
         }
diff --git a/tests/Unit/Tax/UsTaxTest.php b/tests/Unit/Tax/UsTaxTest.php
index b1af855f06d3..15a0c10f1d5a 100644
--- a/tests/Unit/Tax/UsTaxTest.php
+++ b/tests/Unit/Tax/UsTaxTest.php
@@ -149,6 +149,521 @@ class UsTaxTest extends TestCase
         return $invoice;
     }
 
+    public function testTaxAuNoExemption()
+    {
+       
+        $settings = CompanySettings::defaults();
+        $settings->country_id = '840'; // germany
+
+        $tax_data = new TaxModel();
+        $tax_data->seller_subregion = 'CA';
+        $tax_data->regions->US->has_sales_above_threshold = true;
+        $tax_data->regions->US->tax_all_subregions = false;
+        $tax_data->regions->AU->has_sales_above_threshold = true;
+        $tax_data->regions->AU->tax_all_subregions = true;
+
+        $company = Company::factory()->create([
+            'account_id' => $this->account->id,
+            'settings' => $settings,
+            'tax_data' => $tax_data,
+            'calculate_taxes' => true,
+            'origin_tax_data' => new Response($this->mock_response),
+        ]);
+
+        $client = Client::factory()->create([
+            'user_id' => $this->user->id,
+            'company_id' => $company->id,
+            'country_id' => 36,
+            'postal_code' => '30002',
+            'shipping_country_id' => 36,
+            'shipping_postal_code' => '30002',
+            'shipping_state' => '30002',
+            'has_valid_vat_number' => false,
+            'is_tax_exempt' => false,
+            'state' => 'NSW'
+        ]);
+
+        $invoice = Invoice::factory()->create([
+            'company_id' => $company->id,
+            'client_id' => $client->id,
+            'status_id' => 1,
+            'user_id' => $this->user->id,
+            'uses_inclusive_taxes' => false,
+            'discount' => 0,
+            'line_items' => [
+                [
+                    'product_key' => 'Test',
+                    'notes' => 'Test',
+                    'cost' => 100,
+                    'quantity' => 1,
+                    'tax_name1' => '',
+                    'tax_rate1' => 0,
+                    'tax_name2' => '',
+                    'tax_rate2' => 0,
+                    'tax_name3' => '',
+                    'tax_rate3' => 0,
+                    'type_id' => '1',
+                    'tax_id' => Product::PRODUCT_TYPE_PHYSICAL,
+                ],
+            ],
+            'tax_rate1' => 0,
+            'tax_rate2' => 0,
+            'tax_rate3' => 0,
+            'tax_name1' => '',
+            'tax_name2' => '',
+            'tax_name3' => '',
+            'tax_data' => new Response($this->mock_response),
+        ]);
+
+        $invoice = $invoice->calc()->getInvoice()->service()->markSent()->save();
+
+        $this->assertEquals(110, $invoice->amount);
+        
+    }
+
+    public function testTaxAuClientExemption()
+    {
+       
+        $settings = CompanySettings::defaults();
+        $settings->country_id = '840'; // germany
+
+        $tax_data = new TaxModel();
+        $tax_data->seller_subregion = 'CA';
+        $tax_data->regions->US->has_sales_above_threshold = true;
+        $tax_data->regions->US->tax_all_subregions = false;
+        $tax_data->regions->AU->has_sales_above_threshold = true;
+        $tax_data->regions->AU->tax_all_subregions = true;
+
+        $company = Company::factory()->create([
+            'account_id' => $this->account->id,
+            'settings' => $settings,
+            'tax_data' => $tax_data,
+            'calculate_taxes' => true,
+            'origin_tax_data' => new Response($this->mock_response),
+        ]);
+
+        $client = Client::factory()->create([
+            'user_id' => $this->user->id,
+            'company_id' => $company->id,
+            'country_id' => 36,
+            'postal_code' => '30002',
+            'shipping_country_id' => 36,
+            'shipping_postal_code' => '30002',
+            'shipping_state' => '30002',
+            'has_valid_vat_number' => false,
+            'is_tax_exempt' => true,
+            'state' => 'NSW'
+        ]);
+
+        $invoice = Invoice::factory()->create([
+            'company_id' => $company->id,
+            'client_id' => $client->id,
+            'status_id' => 1,
+            'user_id' => $this->user->id,
+            'uses_inclusive_taxes' => false,
+            'discount' => 0,
+            'line_items' => [
+                [
+                    'product_key' => 'Test',
+                    'notes' => 'Test',
+                    'cost' => 100,
+                    'quantity' => 1,
+                    'tax_name1' => '',
+                    'tax_rate1' => 0,
+                    'tax_name2' => '',
+                    'tax_rate2' => 0,
+                    'tax_name3' => '',
+                    'tax_rate3' => 0,
+                    'type_id' => '1',
+                    'tax_id' => Product::PRODUCT_TYPE_PHYSICAL,
+                ],
+            ],
+            'tax_rate1' => 0,
+            'tax_rate2' => 0,
+            'tax_rate3' => 0,
+            'tax_name1' => '',
+            'tax_name2' => '',
+            'tax_name3' => '',
+            'tax_data' => new Response($this->mock_response),
+        ]);
+
+        $invoice = $invoice->calc()->getInvoice()->service()->markSent()->save();
+
+        $this->assertEquals(100, $invoice->amount);
+        
+    }
+
+    public function testTaxAuProductExemption()
+    {
+       
+        $settings = CompanySettings::defaults();
+        $settings->country_id = '840'; // germany
+
+        $tax_data = new TaxModel();
+        $tax_data->seller_subregion = 'CA';
+        $tax_data->regions->US->has_sales_above_threshold = true;
+        $tax_data->regions->US->tax_all_subregions = false;
+        $tax_data->regions->AU->has_sales_above_threshold = true;
+        $tax_data->regions->AU->tax_all_subregions = true;
+
+        $company = Company::factory()->create([
+            'account_id' => $this->account->id,
+            'settings' => $settings,
+            'tax_data' => $tax_data,
+            'calculate_taxes' => true,
+            'origin_tax_data' => new Response($this->mock_response),
+        ]);
+
+        $client = Client::factory()->create([
+            'user_id' => $this->user->id,
+            'company_id' => $company->id,
+            'country_id' => 36,
+            'postal_code' => '30002',
+            'shipping_country_id' => 36,
+            'shipping_postal_code' => '30002',
+            'shipping_state' => '30002',
+            'has_valid_vat_number' => false,
+            'is_tax_exempt' => false,
+            'state' => 'NSW'
+        ]);
+
+        $invoice = Invoice::factory()->create([
+            'company_id' => $company->id,
+            'client_id' => $client->id,
+            'status_id' => 1,
+            'user_id' => $this->user->id,
+            'uses_inclusive_taxes' => false,
+            'discount' => 0,
+            'line_items' => [
+                [
+                    'product_key' => 'Test',
+                    'notes' => 'Test',
+                    'cost' => 100,
+                    'quantity' => 1,
+                    'tax_name1' => '',
+                    'tax_rate1' => 0,
+                    'tax_name2' => '',
+                    'tax_rate2' => 0,
+                    'tax_name3' => '',
+                    'tax_rate3' => 0,
+                    'type_id' => '1',
+                    'tax_id' => Product::PRODUCT_TYPE_EXEMPT,
+                ],
+            ],
+            'tax_rate1' => 0,
+            'tax_rate2' => 0,
+            'tax_rate3' => 0,
+            'tax_name1' => '',
+            'tax_name2' => '',
+            'tax_name3' => '',
+            'tax_data' => new Response($this->mock_response),
+        ]);
+
+        $invoice = $invoice->calc()->getInvoice()->service()->markSent()->save();
+
+        $this->assertEquals(100, $invoice->amount);
+        
+    }
+
+    public function testTaxAuProductOverride()
+    {
+       
+        $settings = CompanySettings::defaults();
+        $settings->country_id = '840'; // germany
+
+        $tax_data = new TaxModel();
+        $tax_data->seller_subregion = 'CA';
+        $tax_data->regions->US->has_sales_above_threshold = true;
+        $tax_data->regions->US->tax_all_subregions = false;
+        $tax_data->regions->AU->has_sales_above_threshold = true;
+        $tax_data->regions->AU->tax_all_subregions = true;
+
+        $company = Company::factory()->create([
+            'account_id' => $this->account->id,
+            'settings' => $settings,
+            'tax_data' => $tax_data,
+            'calculate_taxes' => true,
+            'origin_tax_data' => new Response($this->mock_response),
+        ]);
+
+        $client = Client::factory()->create([
+            'user_id' => $this->user->id,
+            'company_id' => $company->id,
+            'country_id' => 36,
+            'postal_code' => '30002',
+            'shipping_country_id' => 36,
+            'shipping_postal_code' => '30002',
+            'shipping_state' => '30002',
+            'has_valid_vat_number' => false,
+            'is_tax_exempt' => false,
+            'state' => 'NSW'
+        ]);
+
+        $invoice = Invoice::factory()->create([
+            'company_id' => $company->id,
+            'client_id' => $client->id,
+            'status_id' => 1,
+            'user_id' => $this->user->id,
+            'uses_inclusive_taxes' => false,
+            'discount' => 0,
+            'line_items' => [
+                [
+                    'product_key' => 'Test',
+                    'notes' => 'Test',
+                    'cost' => 100,
+                    'quantity' => 1,
+                    'tax_name1' => 'OVERRIDE',
+                    'tax_rate1' => 20,
+                    'tax_name2' => '',
+                    'tax_rate2' => 0,
+                    'tax_name3' => '',
+                    'tax_rate3' => 0,
+                    'type_id' => '1',
+                    'tax_id' => Product::PRODUCT_TYPE_OVERRIDE_TAX,
+                ],
+            ],
+            'tax_rate1' => 0,
+            'tax_rate2' => 0,
+            'tax_rate3' => 0,
+            'tax_name1' => '',
+            'tax_name2' => '',
+            'tax_name3' => '',
+            'tax_data' => new Response($this->mock_response),
+        ]);
+
+        $invoice = $invoice->calc()->getInvoice()->service()->markSent()->save();
+
+        $this->assertEquals(120, $invoice->amount);
+        
+    }
+    
+    public function testInterstateFreightNoTaxWithProductTax()
+    {
+
+        $settings = CompanySettings::defaults();
+        $settings->country_id = '840'; // germany
+
+        $tax_data = new TaxModel();
+        $tax_data->seller_subregion = 'CA';
+        $tax_data->regions->US->has_sales_above_threshold = true;
+        $tax_data->regions->US->tax_all_subregions = true;
+
+        $company = Company::factory()->create([
+            'account_id' => $this->account->id,
+            'settings' => $settings,
+            'tax_data' => $tax_data,
+            'calculate_taxes' => true,
+            'origin_tax_data' => new Response($this->mock_response),
+        ]);
+
+        $client = Client::factory()->create([
+            'user_id' => $this->user->id,
+            'company_id' => $company->id,
+            'country_id' => 840,
+            'postal_code' => '30002',
+            'shipping_country_id' => 840,
+            'shipping_postal_code' => '30002',
+            'shipping_state' => '30002',
+            'has_valid_vat_number' => false,
+            'is_tax_exempt' => false,
+            'state' => 'GA'
+        ]);
+
+        $invoice = Invoice::factory()->create([
+            'company_id' => $company->id,
+            'client_id' => $client->id,
+            'status_id' => 1,
+            'user_id' => $this->user->id,
+            'uses_inclusive_taxes' => false,
+            'discount' => 0,
+            'line_items' => [
+                [
+                    'product_key' => 'Test',
+                    'notes' => 'Test',
+                    'cost' => 100,
+                    'quantity' => 1,
+                    'tax_name1' => '',
+                    'tax_rate1' => 0,
+                    'tax_name2' => '',
+                    'tax_rate2' => 0,
+                    'tax_name3' => '',
+                    'tax_rate3' => 0,
+                    'type_id' => '1',
+                    'tax_id' => Product::PRODUCT_TYPE_SHIPPING,
+                ],
+                [
+                    'product_key' => 'Test',
+                    'notes' => 'Test',
+                    'cost' => 100,
+                    'quantity' => 1,
+                    'tax_name1' => '',
+                    'tax_rate1' => 0,
+                    'tax_name2' => '',
+                    'tax_rate2' => 0,
+                    'tax_name3' => '',
+                    'tax_rate3' => 0,
+                    'type_id' => '1',
+                    'tax_id' => Product::PRODUCT_TYPE_PHYSICAL,
+                ],
+            ],
+            'tax_rate1' => 0,
+            'tax_rate2' => 0,
+            'tax_rate3' => 0,
+            'tax_name1' => '',
+            'tax_name2' => '',
+            'tax_name3' => '',
+            'tax_data' => new Response($this->mock_response),
+        ]);
+
+        $invoice = $invoice->calc()->getInvoice()->service()->markSent()->save();
+
+        $this->assertEquals(208.75, $invoice->amount);
+
+    }
+
+    public function testInterstateFreightProductNoTax()
+    {
+
+        $settings = CompanySettings::defaults();
+        $settings->country_id = '840'; // germany
+
+        $tax_data = new TaxModel();
+        $tax_data->seller_subregion = 'CA';
+        $tax_data->regions->US->has_sales_above_threshold = true;
+        $tax_data->regions->US->tax_all_subregions = false;
+
+        $company = Company::factory()->create([
+            'account_id' => $this->account->id,
+            'settings' => $settings,
+            'tax_data' => $tax_data,
+            'calculate_taxes' => true,
+            'origin_tax_data' => new Response($this->mock_response),
+        ]);
+
+        $client = Client::factory()->create([
+            'user_id' => $this->user->id,
+            'company_id' => $company->id,
+            'country_id' => 840,
+            'postal_code' => '30002',
+            'shipping_country_id' => 840,
+            'shipping_postal_code' => '30002',
+            'shipping_state' => '30002',
+            'has_valid_vat_number' => false,
+            'is_tax_exempt' => false,
+            'state' => 'GA'
+        ]);
+
+        $invoice = Invoice::factory()->create([
+            'company_id' => $company->id,
+            'client_id' => $client->id,
+            'status_id' => 1,
+            'user_id' => $this->user->id,
+            'uses_inclusive_taxes' => false,
+            'discount' => 0,
+            'line_items' => [
+                [
+                    'product_key' => 'Test',
+                    'notes' => 'Test',
+                    'cost' => 100,
+                    'quantity' => 1,
+                    'tax_name1' => '',
+                    'tax_rate1' => 0,
+                    'tax_name2' => '',
+                    'tax_rate2' => 0,
+                    'tax_name3' => '',
+                    'tax_rate3' => 0,
+                    'type_id' => '1',
+                    'tax_id' => Product::PRODUCT_TYPE_SHIPPING,
+                ],
+            ],
+            'tax_rate1' => 0,
+            'tax_rate2' => 0,
+            'tax_rate3' => 0,
+            'tax_name1' => '',
+            'tax_name2' => '',
+            'tax_name3' => '',
+            'tax_data' => new Response($this->mock_response),
+        ]);
+
+        $invoice = $invoice->calc()->getInvoice()->service()->markSent()->save();
+
+        $this->assertEquals(100, $invoice->amount);
+
+    }
+
+
+
+    public function testInterstateServiceProductNoTax()
+    {
+
+        $settings = CompanySettings::defaults();
+        $settings->country_id = '840'; // germany
+
+        $tax_data = new TaxModel();
+        $tax_data->seller_subregion = 'CA';
+        $tax_data->regions->US->has_sales_above_threshold = true;
+        $tax_data->regions->US->tax_all_subregions = false;
+
+        $company = Company::factory()->create([
+            'account_id' => $this->account->id,
+            'settings' => $settings,
+            'tax_data' => $tax_data,
+            'calculate_taxes' => true,
+            'origin_tax_data' => new Response($this->mock_response),
+        ]);
+
+        $client = Client::factory()->create([
+            'user_id' => $this->user->id,
+            'company_id' => $company->id,
+            'country_id' => 840,
+            'postal_code' => '30002',
+            'shipping_country_id' => 840,
+            'shipping_postal_code' => '30002',
+            'shipping_state' => '30002',
+            'has_valid_vat_number' => false,
+            'is_tax_exempt' => false,
+            'state' => 'GA'
+        ]);
+
+        $invoice = Invoice::factory()->create([
+            'company_id' => $company->id,
+            'client_id' => $client->id,
+            'status_id' => 1,
+            'user_id' => $this->user->id,
+            'uses_inclusive_taxes' => false,
+            'discount' => 0,
+            'line_items' => [
+                [
+                    'product_key' => 'Test',
+                    'notes' => 'Test',
+                    'cost' => 100,
+                    'quantity' => 1,
+                    'tax_name1' => '',
+                    'tax_rate1' => 0,
+                    'tax_name2' => '',
+                    'tax_rate2' => 0,
+                    'tax_name3' => '',
+                    'tax_rate3' => 0,
+                    'type_id' => '2',
+                    'tax_id' => Product::PRODUCT_TYPE_SERVICE,
+                ],
+            ],
+            'tax_rate1' => 0,
+            'tax_rate2' => 0,
+            'tax_rate3' => 0,
+            'tax_name1' => '',
+            'tax_name2' => '',
+            'tax_name3' => '',
+            'tax_data' => new Response($this->mock_response),
+        ]);
+
+        $invoice = $invoice->calc()->getInvoice()->service()->markSent()->save();
+
+        $this->assertEquals(100, $invoice->amount);
+
+    }
+
+
     public function testInterstateWithNoTax()
     {
 
@@ -219,8 +734,6 @@ class UsTaxTest extends TestCase
 
     }
 
-
-
     public function testSameSubregionAndExemptProduct()
     {
 
@@ -293,6 +806,78 @@ class UsTaxTest extends TestCase
 
     }
 
+    public function testSameSubregionAndExemptClient()
+    {
+
+        $settings = CompanySettings::defaults();
+        $settings->country_id = '840'; // germany
+
+        $tax_data = new TaxModel();
+        $tax_data->seller_subregion = 'CA';
+        $tax_data->regions->US->has_sales_above_threshold = true;
+        $tax_data->regions->US->tax_all_subregions = true;
+        $tax_data->regions->EU->has_sales_above_threshold = true;
+        $tax_data->regions->EU->tax_all_subregions = true;
+        $tax_data->regions->EU->subregions->DE->tax_rate = 21;
+
+        $company = Company::factory()->create([
+            'account_id' => $this->account->id,
+            'settings' => $settings,
+            'tax_data' => $tax_data,
+            'calculate_taxes' => true,
+            'origin_tax_data' => new Response($this->mock_response),
+        ]);
+
+        $client = Client::factory()->create([
+            'user_id' => $this->user->id,
+            'company_id' => $company->id,
+            'country_id' => 840,
+            'postal_code' => '90210',
+            'shipping_country_id' => 840,
+            'shipping_postal_code' => '90210',
+            'has_valid_vat_number' => false,
+            'is_tax_exempt' => true,
+        ]);
+
+        $invoice = Invoice::factory()->create([
+            'company_id' => $company->id,
+            'client_id' => $client->id,
+            'status_id' => 1,
+            'user_id' => $this->user->id,
+            'uses_inclusive_taxes' => false,
+            'discount' => 0,
+            'line_items' => [
+                [
+                    'product_key' => 'Test',
+                    'notes' => 'Test',
+                    'cost' => 100,
+                    'quantity' => 1,
+                    'tax_name1' => '',
+                    'tax_rate1' => 0,
+                    'tax_name2' => '',
+                    'tax_rate2' => 0,
+                    'tax_name3' => '',
+                    'tax_rate3' => 0,
+                    'type_id' => '1',
+                    'tax_id' => Product::PRODUCT_TYPE_PHYSICAL,
+                ],
+            ],
+            'tax_rate1' => 0,
+            'tax_rate2' => 0,
+            'tax_rate3' => 0,
+            'tax_name1' => '',
+            'tax_name2' => '',
+            'tax_name3' => '',
+            'tax_data' => new Response($this->mock_response),
+        ]);
+
+        $invoice = $invoice->calc()->getInvoice()->service()->markSent()->save();
+
+        $this->assertEquals(100, $invoice->amount);
+
+    }
+
+
     public function testForeignTaxesEnabledWithExemptProduct()
     {
             $settings = CompanySettings::defaults();