diff --git a/app/Domains/Sales/Application/RecurringInvoiceService.php b/app/Domains/Sales/Application/RecurringInvoiceService.php
index 7a6d5a93..c1dcd85d 100644
--- a/app/Domains/Sales/Application/RecurringInvoiceService.php
+++ b/app/Domains/Sales/Application/RecurringInvoiceService.php
@@ -162,6 +162,7 @@ class RecurringInvoiceService
         $newInvoice['paid_status'] = Invoice::STATUS_UNPAID;
         $newInvoice['sub_total'] = $recurringInvoice->sub_total;
         $newInvoice['tax_per_item'] = $recurringInvoice->tax_per_item;
+        $newInvoice['tax_included'] = $recurringInvoice->tax_included;
         $newInvoice['discount_per_item'] = $recurringInvoice->discount_per_item;
         $newInvoice['tax'] = $recurringInvoice->tax;
         $newInvoice['total'] = $recurringInvoice->total;
@@ -231,6 +232,10 @@ class RecurringInvoiceService
             $createdItem = $recurringInvoice->items()->create($item);
             if (array_key_exists('taxes', $item) && $item['taxes']) {
                 foreach ($item['taxes'] as $tax) {
+                    if (empty($tax['tax_type_id'])) {
+                        continue;
+                    }
+
                     $tax['company_id'] = $recurringInvoice->company_id;
                     if (gettype($tax['amount']) !== 'NULL') {
                         $createdItem->taxes()->create($tax);
diff --git a/app/Domains/Sales/Http/Requests/Concerns/ValidatesDocumentTaxPlaceholders.php b/app/Domains/Sales/Http/Requests/Concerns/ValidatesDocumentTaxPlaceholders.php
new file mode 100644
index 00000000..7eceec74
--- /dev/null
+++ b/app/Domains/Sales/Http/Requests/Concerns/ValidatesDocumentTaxPlaceholders.php
@@ -0,0 +1,44 @@
+<?php
+
+namespace App\Domains\Sales\Http\Requests\Concerns;
+
+use Illuminate\Validation\Validator;
+
+trait ValidatesDocumentTaxPlaceholders
+{
+    protected function validateDocumentTaxPlaceholders(Validator $validator): void
+    {
+        $validator->after(function (Validator $validator): void {
+            $items = $this->input('items', []);
+
+            if (! is_array($items)) {
+                return;
+            }
+
+            foreach ($items as $itemIndex => $item) {
+                if (! is_array($item)) {
+                    continue;
+                }
+
+                $taxes = $item['taxes'] ?? [];
+
+                if (! is_array($taxes)) {
+                    continue;
+                }
+
+                foreach ($taxes as $taxIndex => $tax) {
+                    if (! is_array($tax) || ! empty($tax['tax_type_id'])) {
+                        continue;
+                    }
+
+                    if ((float) ($tax['amount'] ?? 0) !== 0.0) {
+                        $validator->errors()->add(
+                            "items.{$itemIndex}.taxes.{$taxIndex}.amount",
+                            'A tax amount requires a tax type.'
+                        );
+                    }
+                }
+            }
+        });
+    }
+}
diff --git a/app/Domains/Sales/Http/Requests/EstimatesRequest.php b/app/Domains/Sales/Http/Requests/EstimatesRequest.php
index 69742064..f6e703d9 100644
--- a/app/Domains/Sales/Http/Requests/EstimatesRequest.php
+++ b/app/Domains/Sales/Http/Requests/EstimatesRequest.php
@@ -9,9 +9,12 @@ use App\Platform\Pdf\Rules\PdfTemplateExists;
 use App\Support\DocumentTotals;
 use Illuminate\Foundation\Http\FormRequest;
 use Illuminate\Validation\Rule;
+use Illuminate\Validation\Validator;
 
 class EstimatesRequest extends FormRequest
 {
+    use Concerns\ValidatesDocumentTaxPlaceholders;
+
     /**
      * Determine if the user is authorized to make this request.
      */
@@ -115,6 +118,11 @@ class EstimatesRequest extends FormRequest
         return $rules;
     }
 
+    public function withValidator(Validator $validator): void
+    {
+        $this->validateDocumentTaxPlaceholders($validator);
+    }
+
     public function getEstimatePayload()
     {
         $company_currency = CompanySetting::getSetting('currency', $this->header('company'));
diff --git a/app/Domains/Sales/Http/Requests/InvoicesRequest.php b/app/Domains/Sales/Http/Requests/InvoicesRequest.php
index 73524e6c..536cab0c 100644
--- a/app/Domains/Sales/Http/Requests/InvoicesRequest.php
+++ b/app/Domains/Sales/Http/Requests/InvoicesRequest.php
@@ -9,9 +9,12 @@ use App\Platform\Pdf\Rules\PdfTemplateExists;
 use App\Support\DocumentTotals;
 use Illuminate\Foundation\Http\FormRequest;
 use Illuminate\Validation\Rule;
+use Illuminate\Validation\Validator;
 
 class InvoicesRequest extends FormRequest
 {
+    use Concerns\ValidatesDocumentTaxPlaceholders;
+
     /**
      * Determine if the user is authorized to make this request.
      */
@@ -114,6 +117,11 @@ class InvoicesRequest extends FormRequest
         return $rules;
     }
 
+    public function withValidator(Validator $validator): void
+    {
+        $this->validateDocumentTaxPlaceholders($validator);
+    }
+
     public function getInvoicePayload(): array
     {
         $company_currency = CompanySetting::getSetting('currency', $this->header('company'));
diff --git a/app/Domains/Sales/Http/Requests/RecurringInvoiceRequest.php b/app/Domains/Sales/Http/Requests/RecurringInvoiceRequest.php
index fa6c1e8b..c4f513ff 100644
--- a/app/Domains/Sales/Http/Requests/RecurringInvoiceRequest.php
+++ b/app/Domains/Sales/Http/Requests/RecurringInvoiceRequest.php
@@ -7,9 +7,12 @@ use App\Domains\Contacts\Models\Customer;
 use App\Domains\Sales\Models\RecurringInvoice;
 use App\Support\DocumentTotals;
 use Illuminate\Foundation\Http\FormRequest;
+use Illuminate\Validation\Validator;
 
 class RecurringInvoiceRequest extends FormRequest
 {
+    use Concerns\ValidatesDocumentTaxPlaceholders;
+
     /**
      * Determine if the user is authorized to make this request.
      */
@@ -101,6 +104,11 @@ class RecurringInvoiceRequest extends FormRequest
         return $rules;
     }
 
+    public function withValidator(Validator $validator): void
+    {
+        $this->validateDocumentTaxPlaceholders($validator);
+    }
+
     public function getRecurringInvoicePayload()
     {
         $company_currency = CompanySetting::getSetting('currency', $this->header('company'));
diff --git a/app/Domains/Taxation/Http/Requests/TaxTypeRequest.php b/app/Domains/Taxation/Http/Requests/TaxTypeRequest.php
index 8421d120..43103989 100644
--- a/app/Domains/Taxation/Http/Requests/TaxTypeRequest.php
+++ b/app/Domains/Taxation/Http/Requests/TaxTypeRequest.php
@@ -5,6 +5,7 @@ namespace App\Domains\Taxation\Http\Requests;
 use App\Domains\Taxation\Models\TaxType;
 use Illuminate\Foundation\Http\FormRequest;
 use Illuminate\Validation\Rule;
+use Illuminate\Validation\Validator;
 
 class TaxTypeRequest extends FormRequest
 {
@@ -44,7 +45,7 @@ class TaxTypeRequest extends FormRequest
                 'nullable',
             ],
             'compound_tax' => [
-                'nullable',
+                'sometimes',
                 'boolean',
             ],
             'collective_tax' => [
@@ -72,6 +73,25 @@ class TaxTypeRequest extends FormRequest
         return $rules;
     }
 
+    public function withValidator(Validator $validator): void
+    {
+        $validator->after(function (Validator $validator): void {
+            if ($validator->errors()->isNotEmpty() || ! $this->effectiveCompoundTax()) {
+                return;
+            }
+
+            if (
+                $this->effectiveCalculationType() !== 'percentage'
+                || $this->effectiveTransactionType() !== TaxType::TRANSACTION_TYPE_SALES
+            ) {
+                $validator->errors()->add(
+                    'compound_tax',
+                    'Compound tax is only available for percentage sales taxes.'
+                );
+            }
+        });
+    }
+
     public function getTaxTypePayload()
     {
         $payload = collect($this->validated());
@@ -85,6 +105,10 @@ class TaxTypeRequest extends FormRequest
             );
         }
 
+        if (! $payload->has('compound_tax') && ! ($this->isMethod('PUT') || $this->isMethod('PATCH'))) {
+            $payload->put('compound_tax', false);
+        }
+
         return $payload
             ->merge([
                 'company_id' => $this->header('company'),
@@ -92,4 +116,34 @@ class TaxTypeRequest extends FormRequest
             ])
             ->toArray();
     }
+
+    private function effectiveCompoundTax(): bool
+    {
+        if ($this->has('compound_tax')) {
+            return $this->boolean('compound_tax');
+        }
+
+        return $this->isMethod('PUT') || $this->isMethod('PATCH')
+            ? $this->route('tax_type')->compound_tax
+            : false;
+    }
+
+    private function effectiveCalculationType(): string
+    {
+        if ($this->has('calculation_type')) {
+            return $this->input('calculation_type');
+        }
+
+        return $this->isMethod('PUT') || $this->isMethod('PATCH')
+            ? $this->route('tax_type')->calculation_type
+            : 'percentage';
+    }
+
+    private function effectiveTransactionType(): string
+    {
+        return $this->input('transaction_type')
+            ?? ($this->isMethod('PUT') || $this->isMethod('PATCH')
+                ? $this->route('tax_type')->transaction_type
+                : TaxType::TRANSACTION_TYPE_SALES);
+    }
 }
diff --git a/app/Support/DocumentTotals.php b/app/Support/DocumentTotals.php
index 6fa02194..69519040 100644
--- a/app/Support/DocumentTotals.php
+++ b/app/Support/DocumentTotals.php
@@ -15,8 +15,8 @@ namespace App\Support;
 class DocumentTotals
 {
     /**
-     * @param  array  $items  each item: price, quantity, discount_val?, taxes?[{amount}]
-     * @param  array  $taxes  document-level taxes: [{amount}, ...]
+     * @param  array  $items  each item: price, quantity, discount_val?, taxes?[{tax_type_id, amount, compound_tax?}]
+     * @param  array  $taxes  document-level taxes: [{amount, compound_tax?}, ...]
      * @return array{sub_total:int, tax:int, total:int}
      */
     public static function compute(array $items, array $taxes, $discountVal, $taxPerItem, bool $taxIncluded, $discountPerItem = 'NO'): array
@@ -25,18 +25,28 @@ class DocumentTotals
         $perItemTax = is_string($taxPerItem) && strtoupper(trim($taxPerItem)) === 'YES';
 
         $subTotal = 0;
-        $itemTaxTotal = 0;
+        $itemSimpleTaxTotal = 0;
+        $itemCompoundTaxTotal = 0;
 
         foreach ($items as $item) {
             $subTotal += self::itemTotal($item, $perItemDiscount);
-            $itemTaxTotal += self::sumTaxAmounts($item['taxes'] ?? []);
+            $itemSimpleTaxTotal += self::sumTaxAmounts($item['taxes'] ?? [], false, true);
+            $itemCompoundTaxTotal += self::sumTaxAmounts($item['taxes'] ?? [], true, true);
         }
 
         $subtotalWithDiscount = $subTotal - (int) round((float) $discountVal);
 
-        $totalTax = $perItemTax ? $itemTaxTotal : self::sumTaxAmounts($taxes);
+        $simpleTaxTotal = $perItemTax
+            ? $itemSimpleTaxTotal
+            : self::sumTaxAmounts($taxes, false);
+        $compoundTaxTotal = $perItemTax
+            ? $itemCompoundTaxTotal
+            : self::sumTaxAmounts($taxes, true);
+        $totalTax = $simpleTaxTotal + $compoundTaxTotal;
 
-        $total = $taxIncluded ? $subtotalWithDiscount : $subtotalWithDiscount + $totalTax;
+        $total = $taxIncluded
+            ? $subtotalWithDiscount + $compoundTaxTotal
+            : $subtotalWithDiscount + $totalTax;
 
         return [
             'sub_total' => $subTotal,
@@ -58,13 +68,26 @@ class DocumentTotals
         return (int) round($price * $quantity) - $discount;
     }
 
-    protected static function sumTaxAmounts(array $taxes): int
+    protected static function sumTaxAmounts(array $taxes, bool $compoundTax, bool $ignorePlaceholders = false): int
     {
         $sum = 0;
         foreach ($taxes as $tax) {
+            if ($ignorePlaceholders && empty($tax['tax_type_id'])) {
+                continue;
+            }
+
+            if (self::isCompoundTax($tax) !== $compoundTax) {
+                continue;
+            }
+
             $sum += (int) round((float) ($tax['amount'] ?? 0));
         }
 
         return $sum;
     }
+
+    protected static function isCompoundTax(array $tax): bool
+    {
+        return filter_var($tax['compound_tax'] ?? false, FILTER_VALIDATE_BOOLEAN);
+    }
 }
diff --git a/resources/scripts/features/company/estimates/store.ts b/resources/scripts/features/company/estimates/store.ts
index 9f91be9b..bd420323 100644
--- a/resources/scripts/features/company/estimates/store.ts
+++ b/resources/scripts/features/company/estimates/store.ts
@@ -160,10 +160,22 @@ export const useEstimateStore = defineStore('estimate', {
     },
 
     getNetTotal(): number {
-      return this.getSubtotalWithDiscount - this.getTotalTax
+      if (this.newEstimate.tax_included) {
+        return this.getSubtotalWithDiscount - this.getTotalSimpleTax
+      }
+
+      return this.getSubtotalWithDiscount
     },
 
     getTotalSimpleTax(state): number {
+      if (state.newEstimate.tax_per_item === 'YES') {
+        return state.newEstimate.items.reduce((sum: number, item: DocumentItem) => {
+          return sum + (item.taxes ?? []).reduce((itemSum, tax) => {
+            return tax.compound_tax ? itemSum : itemSum + (tax.amount ?? 0)
+          }, 0)
+        }, 0)
+      }
+
       return state.newEstimate.taxes.reduce(
         (sum: number, tax: DocumentTax) => {
           if (!tax.compound_tax) return sum + (tax.amount ?? 0)
@@ -174,6 +186,14 @@ export const useEstimateStore = defineStore('estimate', {
     },
 
     getTotalCompoundTax(state): number {
+      if (state.newEstimate.tax_per_item === 'YES') {
+        return state.newEstimate.items.reduce((sum: number, item: DocumentItem) => {
+          return sum + (item.taxes ?? []).reduce((itemSum, tax) => {
+            return tax.compound_tax ? itemSum + (tax.amount ?? 0) : itemSum
+          }, 0)
+        }, 0)
+      }
+
       return state.newEstimate.taxes.reduce(
         (sum: number, tax: DocumentTax) => {
           if (tax.compound_tax) return sum + (tax.amount ?? 0)
@@ -184,16 +204,7 @@ export const useEstimateStore = defineStore('estimate', {
     },
 
     getTotalTax(): number {
-      if (
-        this.newEstimate.tax_per_item === 'NO' ||
-        this.newEstimate.tax_per_item === null
-      ) {
-        return this.getTotalSimpleTax + this.getTotalCompoundTax
-      }
-      return this.newEstimate.items.reduce(
-        (sum: number, item: DocumentItem) => sum + (item.tax ?? 0),
-        0,
-      )
+      return this.getTotalSimpleTax + this.getTotalCompoundTax
     },
 
     getSubtotalWithDiscount(): number {
@@ -202,7 +213,7 @@ export const useEstimateStore = defineStore('estimate', {
 
     getTotal(): number {
       if (this.newEstimate.tax_included) {
-        return this.getSubtotalWithDiscount
+        return this.getSubtotalWithDiscount + this.getTotalCompoundTax
       }
       return this.getSubtotalWithDiscount + this.getTotalTax
     },
@@ -508,6 +519,9 @@ export const useEstimateStore = defineStore('estimate', {
 
       if (!isEdit && companySettings) {
         this.newEstimate.tax_per_item = companySettings.tax_per_item ?? null
+        this.newEstimate.tax_included =
+          companySettings.tax_included === 'YES' &&
+          companySettings.tax_included_by_default === 'YES'
         this.newEstimate.sales_tax_type = companySettings.sales_tax_type ?? null
         this.newEstimate.sales_tax_address_type =
           companySettings.sales_tax_address_type ?? null
diff --git a/resources/scripts/features/company/estimates/views/EstimateCreateView.vue b/resources/scripts/features/company/estimates/views/EstimateCreateView.vue
index 69cf6d24..1b473934 100644
--- a/resources/scripts/features/company/estimates/views/EstimateCreateView.vue
+++ b/resources/scripts/features/company/estimates/views/EstimateCreateView.vue
@@ -62,6 +62,7 @@
           :currency="estimateStore.newEstimate.selectedCurrency"
           :is-loading="isLoadingContent"
           :item-validation-scope="estimateValidationScope"
+          :tax-included-setting="companyStore.selectedCompanySettings.tax_included"
           :store="estimateStore"
           store-prop="newEstimate"
         />
@@ -115,6 +116,7 @@ import {
 } from '@vuelidate/validators'
 import useVuelidate from '@vuelidate/core'
 import { useEstimateStore } from '../store'
+import { useCompanyStore } from '@/scripts/stores/company.store'
 import { useNotificationStore } from '@/scripts/stores/notification.store'
 import {
   handleApiError,
@@ -130,6 +132,7 @@ import {
 } from '../../../shared/document-form'
 
 const estimateStore = useEstimateStore()
+const companyStore = useCompanyStore()
 const notificationStore = useNotificationStore()
 const { t } = useI18n()
 const route = useRoute()
diff --git a/resources/scripts/features/company/invoices/store.ts b/resources/scripts/features/company/invoices/store.ts
index 4e841b30..ec7c310c 100644
--- a/resources/scripts/features/company/invoices/store.ts
+++ b/resources/scripts/features/company/invoices/store.ts
@@ -171,10 +171,22 @@ export const useInvoiceStore = defineStore('invoice', {
     },
 
     getNetTotal(): number {
-      return this.getSubtotalWithDiscount - this.getTotalTax
+      if (this.newInvoice.tax_included) {
+        return this.getSubtotalWithDiscount - this.getTotalSimpleTax
+      }
+
+      return this.getSubtotalWithDiscount
     },
 
     getTotalSimpleTax(state): number {
+      if (state.newInvoice.tax_per_item === 'YES') {
+        return state.newInvoice.items.reduce((sum: number, item: DocumentItem) => {
+          return sum + (item.taxes ?? []).reduce((itemSum, tax) => {
+            return tax.compound_tax ? itemSum : itemSum + (tax.amount ?? 0)
+          }, 0)
+        }, 0)
+      }
+
       return state.newInvoice.taxes.reduce(
         (sum: number, tax: DocumentTax) => {
           if (!tax.compound_tax) return sum + (tax.amount ?? 0)
@@ -185,6 +197,14 @@ export const useInvoiceStore = defineStore('invoice', {
     },
 
     getTotalCompoundTax(state): number {
+      if (state.newInvoice.tax_per_item === 'YES') {
+        return state.newInvoice.items.reduce((sum: number, item: DocumentItem) => {
+          return sum + (item.taxes ?? []).reduce((itemSum, tax) => {
+            return tax.compound_tax ? itemSum + (tax.amount ?? 0) : itemSum
+          }, 0)
+        }, 0)
+      }
+
       return state.newInvoice.taxes.reduce(
         (sum: number, tax: DocumentTax) => {
           if (tax.compound_tax) return sum + (tax.amount ?? 0)
@@ -195,16 +215,7 @@ export const useInvoiceStore = defineStore('invoice', {
     },
 
     getTotalTax(): number {
-      if (
-        this.newInvoice.tax_per_item === 'NO' ||
-        this.newInvoice.tax_per_item === null
-      ) {
-        return this.getTotalSimpleTax + this.getTotalCompoundTax
-      }
-      return this.newInvoice.items.reduce(
-        (sum: number, item: DocumentItem) => sum + (item.tax ?? 0),
-        0,
-      )
+      return this.getTotalSimpleTax + this.getTotalCompoundTax
     },
 
     getSubtotalWithDiscount(): number {
@@ -213,7 +224,7 @@ export const useInvoiceStore = defineStore('invoice', {
 
     getTotal(): number {
       if (this.newInvoice.tax_included) {
-        return this.getSubtotalWithDiscount
+        return this.getSubtotalWithDiscount + this.getTotalCompoundTax
       }
       return this.getSubtotalWithDiscount + this.getTotalTax
     },
@@ -504,6 +515,9 @@ export const useInvoiceStore = defineStore('invoice', {
 
       if (!isEdit && companySettings) {
         this.newInvoice.tax_per_item = companySettings.tax_per_item ?? null
+        this.newInvoice.tax_included =
+          companySettings.tax_included === 'YES' &&
+          companySettings.tax_included_by_default === 'YES'
         this.newInvoice.sales_tax_type = companySettings.sales_tax_type ?? null
         this.newInvoice.sales_tax_address_type =
           companySettings.sales_tax_address_type ?? null
diff --git a/resources/scripts/features/company/invoices/views/InvoiceCreateView.vue b/resources/scripts/features/company/invoices/views/InvoiceCreateView.vue
index db30c89b..5db5e5a7 100644
--- a/resources/scripts/features/company/invoices/views/InvoiceCreateView.vue
+++ b/resources/scripts/features/company/invoices/views/InvoiceCreateView.vue
@@ -65,6 +65,7 @@
           :currency="invoiceStore.newInvoice.selectedCurrency"
           :is-loading="isLoadingContent"
           :item-validation-scope="invoiceValidationScope"
+          :tax-included-setting="companyStore.selectedCompanySettings.tax_included"
           :store="invoiceStore"
           store-prop="newInvoice"
         />
diff --git a/resources/scripts/features/company/recurring-invoices/store.ts b/resources/scripts/features/company/recurring-invoices/store.ts
index 00ee042e..d9f5b576 100644
--- a/resources/scripts/features/company/recurring-invoices/store.ts
+++ b/resources/scripts/features/company/recurring-invoices/store.ts
@@ -192,10 +192,22 @@ export const useRecurringInvoiceStore = defineStore('recurring-invoice', {
     },
 
     getNetTotal(): number {
-      return this.getSubtotalWithDiscount - this.getTotalTax
+      if (this.newRecurringInvoice.tax_included) {
+        return this.getSubtotalWithDiscount - this.getTotalSimpleTax
+      }
+
+      return this.getSubtotalWithDiscount
     },
 
     getTotalSimpleTax(state): number {
+      if (state.newRecurringInvoice.tax_per_item === 'YES') {
+        return state.newRecurringInvoice.items.reduce((sum: number, item: DocumentItem) => {
+          return sum + (item.taxes ?? []).reduce((itemSum, tax) => {
+            return tax.compound_tax ? itemSum : itemSum + (tax.amount ?? 0)
+          }, 0)
+        }, 0)
+      }
+
       return state.newRecurringInvoice.taxes.reduce(
         (sum: number, tax: DocumentTax) => {
           if (!tax.compound_tax) return sum + (tax.amount ?? 0)
@@ -206,6 +218,14 @@ export const useRecurringInvoiceStore = defineStore('recurring-invoice', {
     },
 
     getTotalCompoundTax(state): number {
+      if (state.newRecurringInvoice.tax_per_item === 'YES') {
+        return state.newRecurringInvoice.items.reduce((sum: number, item: DocumentItem) => {
+          return sum + (item.taxes ?? []).reduce((itemSum, tax) => {
+            return tax.compound_tax ? itemSum + (tax.amount ?? 0) : itemSum
+          }, 0)
+        }, 0)
+      }
+
       return state.newRecurringInvoice.taxes.reduce(
         (sum: number, tax: DocumentTax) => {
           if (tax.compound_tax) return sum + (tax.amount ?? 0)
@@ -216,16 +236,7 @@ export const useRecurringInvoiceStore = defineStore('recurring-invoice', {
     },
 
     getTotalTax(): number {
-      if (
-        this.newRecurringInvoice.tax_per_item === 'NO' ||
-        this.newRecurringInvoice.tax_per_item === null
-      ) {
-        return this.getTotalSimpleTax + this.getTotalCompoundTax
-      }
-      return this.newRecurringInvoice.items.reduce(
-        (sum: number, item: DocumentItem) => sum + (item.tax ?? 0),
-        0,
-      )
+      return this.getTotalSimpleTax + this.getTotalCompoundTax
     },
 
     getSubtotalWithDiscount(): number {
@@ -234,7 +245,7 @@ export const useRecurringInvoiceStore = defineStore('recurring-invoice', {
 
     getTotal(): number {
       if (this.newRecurringInvoice.tax_included) {
-        return this.getSubtotalWithDiscount
+        return this.getSubtotalWithDiscount + this.getTotalCompoundTax
       }
       return this.getSubtotalWithDiscount + this.getTotalTax
     },
@@ -511,6 +522,9 @@ export const useRecurringInvoiceStore = defineStore('recurring-invoice', {
       if (!isEdit && companySettings) {
         this.newRecurringInvoice.tax_per_item =
           companySettings.tax_per_item ?? null
+        this.newRecurringInvoice.tax_included =
+          companySettings.tax_included === 'YES' &&
+          companySettings.tax_included_by_default === 'YES'
         this.newRecurringInvoice.discount_per_item =
           companySettings.discount_per_item ?? null
         this.newRecurringInvoice.sales_tax_type =
diff --git a/resources/scripts/features/shared/document-form/DocumentItemRow.vue b/resources/scripts/features/shared/document-form/DocumentItemRow.vue
index 36740d15..85d8597c 100644
--- a/resources/scripts/features/shared/document-form/DocumentItemRow.vue
+++ b/resources/scripts/features/shared/document-form/DocumentItemRow.vue
@@ -181,6 +181,7 @@
                 :store-prop="storeProp"
                 :discount="discount"
                 @update="updateTax"
+                @tax-type-created="onTaxTypeCreated"
               />
             </td>
           </tr>
@@ -225,6 +226,7 @@ interface Emits {
   (e: 'update', data: Record<string, unknown>): void
   (e: 'remove', index: number): void
   (e: 'itemValidate', valid: boolean): void
+  (e: 'taxTypeCreated', taxType: TaxType): void
 }
 
 const props = withDefaults(defineProps<Props>(), {
@@ -391,6 +393,10 @@ function updateTax(data: { index: number; item: DocumentTax }): void {
   syncItemToStore()
 }
 
+function onTaxTypeCreated(taxType: TaxType): void {
+  emit('taxTypeCreated', taxType)
+}
+
 function setDiscount(): void {
   const newValue = formData.value.items[props.index].discount
   const absoluteSubtotal = Math.abs(subtotal.value)
diff --git a/resources/scripts/features/shared/document-form/DocumentItemRowTax.vue b/resources/scripts/features/shared/document-form/DocumentItemRowTax.vue
index 82c6eece..99d5ffdb 100644
--- a/resources/scripts/features/shared/document-form/DocumentItemRowTax.vue
+++ b/resources/scripts/features/shared/document-form/DocumentItemRowTax.vue
@@ -103,6 +103,7 @@ interface Props {
 interface Emits {
   (e: 'remove', index: number): void
   (e: 'update', payload: { index: number; item: DocumentTax }): void
+  (e: 'taxTypeCreated', taxType: TaxType): void
 }
 
 const props = withDefaults(defineProps<Props>(), {
@@ -246,9 +247,28 @@ function openTaxModal(): void {
       transaction_type: 'sales',
     },
     size: 'sm',
+    refreshData: (...args: unknown[]) => {
+      const taxType = args[0]
+      if (isTaxType(taxType)) {
+        selectedTax.value = taxType
+        onSelectTax(taxType)
+        emit('taxTypeCreated', taxType)
+      }
+    },
   })
 }
 
+function isTaxType(value: unknown): value is TaxType {
+  return (
+    typeof value === 'object' &&
+    value !== null &&
+    'id' in value &&
+    typeof value.id === 'number' &&
+    'name' in value &&
+    typeof value.name === 'string'
+  )
+}
+
 function removeTax(index: number): void {
   const store = props.store as Record<string, Record<string, unknown>>
   const formData = store[props.storeProp] as DocumentFormData
diff --git a/resources/scripts/features/shared/document-form/DocumentItemsTable.vue b/resources/scripts/features/shared/document-form/DocumentItemsTable.vue
index 2963d3b6..d6e8c551 100644
--- a/resources/scripts/features/shared/document-form/DocumentItemsTable.vue
+++ b/resources/scripts/features/shared/document-form/DocumentItemsTable.vue
@@ -3,6 +3,7 @@
     <!-- Single shared item-create modal for the whole table (one instance, not one
          per row — stacked HeadlessUI dialogs would otherwise close each other). -->
     <ItemModal />
+    <TaxTypeModal />
 
     <!-- Tax Included Toggle -->
     <div
@@ -96,6 +97,7 @@
             :can-add-tax="canAddTax"
             :store="store"
             :store-prop="storeProp"
+            @tax-type-created="upsertAvailableTaxType"
           />
         </template>
       </draggable>
@@ -116,6 +118,7 @@ import { computed, onMounted, ref } from 'vue'
 import draggable from 'vuedraggable'
 import DocumentItemRow from './DocumentItemRow.vue'
 import ItemModal from '@/scripts/features/company/items/components/ItemModal.vue'
+import TaxTypeModal from '@/scripts/features/company/settings/components/TaxTypeModal.vue'
 import { useUserStore } from '../../../stores/user.store'
 import { taxTypeService } from '../../../api/services/tax-type.service'
 import { ABILITIES } from '../../../config/abilities'
@@ -159,6 +162,17 @@ onMounted(async () => {
   }
 })
 
+function upsertAvailableTaxType(taxType: TaxType): void {
+  const index = availableTaxTypes.value.findIndex(({ id }) => id === taxType.id)
+
+  if (index === -1) {
+    availableTaxTypes.value.push(taxType)
+    return
+  }
+
+  availableTaxTypes.value.splice(index, 1, taxType)
+}
+
 const formData = computed<DocumentFormData>(() => {
   return props.store[props.storeProp] as DocumentFormData
 })
diff --git a/resources/scripts/features/shared/document-form/DocumentTotals.vue b/resources/scripts/features/shared/document-form/DocumentTotals.vue
index 9ffa5604..c6590e0c 100644
--- a/resources/scripts/features/shared/document-form/DocumentTotals.vue
+++ b/resources/scripts/features/shared/document-form/DocumentTotals.vue
@@ -442,6 +442,8 @@ function selectPercentage(): void {
 }
 
 function onSelectTax(selectedTax: TaxType): void {
+  upsertAvailableTaxType(selectedTax)
+
   const amount = calcTaxAmount(
     props.store.getSubtotalWithDiscount,
     selectedTax.percent,
@@ -472,6 +474,17 @@ function onSelectTax(selectedTax: TaxType): void {
   recalculateGlobalTaxes()
 }
 
+function upsertAvailableTaxType(taxType: TaxType): void {
+  const index = availableTaxTypes.value.findIndex(({ id }) => id === taxType.id)
+
+  if (index === -1) {
+    availableTaxTypes.value.push(taxType)
+    return
+  }
+
+  availableTaxTypes.value.splice(index, 1, taxType)
+}
+
 function updateTax(data: DocumentTax): void {
   const tax = formData.value.taxes.find((t: DocumentTax) => t.id === data.id)
   if (tax) {
diff --git a/resources/scripts/features/shared/document-form/use-document-calculations.ts b/resources/scripts/features/shared/document-form/use-document-calculations.ts
index ad297eeb..cceedf30 100644
--- a/resources/scripts/features/shared/document-form/use-document-calculations.ts
+++ b/resources/scripts/features/shared/document-form/use-document-calculations.ts
@@ -86,6 +86,14 @@ export function useDocumentCalculations(options: UseDocumentCalculationsOptions)
   })
 
   const totalSimpleTax = computed<number>(() => {
+    if (taxPerItem.value === 'YES') {
+      return items.value.reduce((sum: number, item: DocumentItem) => {
+        return sum + (item.taxes ?? []).reduce((itemSum, tax) => {
+          return tax.compound_tax ? itemSum : itemSum + (tax.amount ?? 0)
+        }, 0)
+      }, 0)
+    }
+
     return taxes.value.reduce((sum: number, tax: DocumentTax) => {
       if (!tax.compound_tax) {
         return sum + (tax.amount ?? 0)
@@ -95,6 +103,14 @@ export function useDocumentCalculations(options: UseDocumentCalculationsOptions)
   })
 
   const totalCompoundTax = computed<number>(() => {
+    if (taxPerItem.value === 'YES') {
+      return items.value.reduce((sum: number, item: DocumentItem) => {
+        return sum + (item.taxes ?? []).reduce((itemSum, tax) => {
+          return tax.compound_tax ? itemSum + (tax.amount ?? 0) : itemSum
+        }, 0)
+      }, 0)
+    }
+
     return taxes.value.reduce((sum: number, tax: DocumentTax) => {
       if (tax.compound_tax) {
         return sum + (tax.amount ?? 0)
@@ -104,12 +120,7 @@ export function useDocumentCalculations(options: UseDocumentCalculationsOptions)
   })
 
   const totalTax = computed<number>(() => {
-    if (taxPerItem.value === 'NO' || taxPerItem.value === null) {
-      return totalSimpleTax.value + totalCompoundTax.value
-    }
-    return items.value.reduce((sum: number, item: DocumentItem) => {
-      return sum + (item.tax ?? 0)
-    }, 0)
+    return totalSimpleTax.value + totalCompoundTax.value
   })
 
   const subtotalWithDiscount = computed<number>(() => {
@@ -117,12 +128,16 @@ export function useDocumentCalculations(options: UseDocumentCalculationsOptions)
   })
 
   const netTotal = computed<number>(() => {
-    return subtotalWithDiscount.value - totalTax.value
+    if (taxIncluded.value) {
+      return subtotalWithDiscount.value - totalSimpleTax.value
+    }
+
+    return subtotalWithDiscount.value
   })
 
   const total = computed<number>(() => {
     if (taxIncluded.value) {
-      return subtotalWithDiscount.value
+      return subtotalWithDiscount.value + totalCompoundTax.value
     }
     return subtotalWithDiscount.value + totalTax.value
   })
@@ -164,8 +179,8 @@ export function calcItemTotal(subtotal: number, discountVal: number): number {
 /**
  * Calculate tax amount for a given total and tax config.
  *
- * A compound tax is charged on the base plus every simple (non-compound) tax
- * already applied, and is never backed out of a tax-inclusive total.
+ * A compound tax is charged on top of an inclusive amount, or on the base plus
+ * every simple (non-compound) tax when the amount is tax-exclusive.
  *
  * @param total Base amount in cents (document subtotal after discount, or an item total after discount)
  * @param percent Percentage rate, when the tax is percentage based
@@ -189,6 +204,10 @@ export function calcTaxAmount(
   }
   if (!total || !percent) return 0
   if (compoundTax) {
+    if (taxIncluded) {
+      return Math.round((total * percent) / 100)
+    }
+
     return Math.round(((total + simpleTaxTotal) * percent) / 100)
   }
   if (taxIncluded) {
diff --git a/tests/Feature/Admin/EstimateTest.php b/tests/Feature/Admin/EstimateTest.php
index 3092da2a..57716146 100644
--- a/tests/Feature/Admin/EstimateTest.php
+++ b/tests/Feature/Admin/EstimateTest.php
@@ -1,6 +1,7 @@
 <?php
 
 use App\Domains\Accounts\Models\Company;
+use App\Domains\Accounts\Models\CompanySetting;
 use App\Domains\Accounts\Models\User;
 use App\Domains\Sales\Http\Controllers\Company\EstimatesController;
 use App\Domains\Sales\Http\Requests\DeleteEstimatesRequest;
@@ -326,6 +327,93 @@ test('create estimate with tax per item', function () {
     ]);
 });
 
+test('persists exclusive per-item simple and compound tax totals', function () {
+    $companyId = User::find(1)->companies()->first()->id;
+    CompanySetting::setSettings(['tax_per_item' => 'YES'], $companyId);
+
+    $simpleTax = Tax::factory()->raw([
+        'name' => 'VAT 19%',
+        'percent' => 19,
+        'amount' => 1900,
+        'compound_tax' => false,
+    ]);
+    $compoundTax = Tax::factory()->raw([
+        'name' => 'Cash levy 1%',
+        'percent' => 1,
+        'amount' => 119,
+        'compound_tax' => true,
+    ]);
+    $placeholderTax = [
+        'tax_type_id' => 0,
+        'name' => '',
+        'amount' => 0,
+        'percent' => null,
+        'calculation_type' => null,
+        'fixed_amount' => 0,
+        'compound_tax' => false,
+    ];
+    $item = EstimateItem::factory()->raw([
+        'price' => 10000,
+        'quantity' => 1,
+        'discount' => 0,
+        'discount_val' => 0,
+        'tax' => 2019,
+        'taxes' => [$simpleTax, $compoundTax, $placeholderTax],
+    ]);
+    $estimate = Estimate::factory()->raw([
+        'items' => [$item],
+        'taxes' => [],
+        'discount' => 0,
+        'discount_val' => 0,
+        'tax_included' => false,
+        'sub_total' => 1,
+        'tax' => 1,
+        'total' => 1,
+    ]);
+
+    postJson('api/v1/estimates', $estimate)->assertCreated();
+
+    $savedEstimate = Estimate::query()
+        ->where('estimate_number', $estimate['estimate_number'])
+        ->firstOrFail();
+    $savedItem = $savedEstimate->items()->firstOrFail();
+
+    expect($savedEstimate->sub_total)->toBe(10000)
+        ->and($savedEstimate->tax)->toBe(2019)
+        ->and($savedEstimate->total)->toBe(12019)
+        ->and($savedItem->taxes()->count())->toBe(2);
+
+    $this->assertDatabaseHas('taxes', [
+        'estimate_item_id' => $savedItem->id,
+        'tax_type_id' => $simpleTax['tax_type_id'],
+        'amount' => 1900,
+        'compound_tax' => 0,
+    ]);
+    $this->assertDatabaseHas('taxes', [
+        'estimate_item_id' => $savedItem->id,
+        'tax_type_id' => $compoundTax['tax_type_id'],
+        'amount' => 119,
+        'compound_tax' => 1,
+    ]);
+});
+
+test('rejects a nonzero per-item placeholder tax row', function () {
+    $estimate = Estimate::factory()->raw([
+        'estimate_number' => 'EST-PLACEHOLDER',
+        'items' => [
+            EstimateItem::factory()->raw([
+                'taxes' => [[
+                    'amount' => 1,
+                ]],
+            ]),
+        ],
+    ]);
+
+    postJson('api/v1/estimates', $estimate)
+        ->assertUnprocessable()
+        ->assertJsonValidationErrors('items.0.taxes.0.amount');
+});
+
 test('create estimate with EUR currency', function () {
     $estimate = Estimate::factory()
         ->raw([
diff --git a/tests/Feature/Admin/InvoiceTest.php b/tests/Feature/Admin/InvoiceTest.php
index c5af29a3..07cbda80 100644
--- a/tests/Feature/Admin/InvoiceTest.php
+++ b/tests/Feature/Admin/InvoiceTest.php
@@ -122,6 +122,65 @@ test('server recomputes invoice totals and ignores client-supplied amounts', fun
     ]);
 });
 
+test('persists an inclusive compound tax on top of the entered gross total', function () {
+    $simpleTax = Tax::factory()->raw([
+        'name' => 'VAT 19%',
+        'percent' => 19,
+        'amount' => 1900,
+        'compound_tax' => false,
+    ]);
+    $compoundTax = Tax::factory()->raw([
+        'name' => 'Cash levy 1%',
+        'percent' => 1,
+        'amount' => 119,
+        'compound_tax' => true,
+    ]);
+    $item = InvoiceItem::factory()->raw([
+        'price' => 11900,
+        'quantity' => 1,
+        'discount' => 0,
+        'discount_val' => 0,
+        'tax' => 0,
+        'taxes' => [],
+    ]);
+    $invoice = Invoice::factory()->raw([
+        'items' => [$item],
+        'taxes' => [$simpleTax, $compoundTax],
+        'discount' => 0,
+        'discount_val' => 0,
+        'tax_included' => true,
+        'sub_total' => 1,
+        'tax' => 1,
+        'total' => 1,
+        'due_amount' => 1,
+    ]);
+
+    postJson('api/v1/invoices', $invoice)->assertOk();
+
+    $savedInvoice = Invoice::query()
+        ->where('invoice_number', $invoice['invoice_number'])
+        ->firstOrFail();
+
+    expect($savedInvoice->sub_total)->toBe(11900)
+        ->and($savedInvoice->tax)->toBe(2019)
+        ->and($savedInvoice->total)->toBe(12019)
+        ->and($savedInvoice->due_amount)->toBe(12019)
+        ->and((bool) $savedInvoice->tax_included)->toBeTrue();
+
+    $this->assertDatabaseHas('taxes', [
+        'invoice_id' => $savedInvoice->id,
+        'tax_type_id' => $simpleTax['tax_type_id'],
+        'amount' => 1900,
+        'compound_tax' => 0,
+    ]);
+    $this->assertDatabaseHas('taxes', [
+        'invoice_id' => $savedInvoice->id,
+        'tax_type_id' => $compoundTax['tax_type_id'],
+        'amount' => 119,
+        'compound_tax' => 1,
+    ]);
+});
+
 test('create invoice with negative and zero item quantities', function () {
     $invoice = Invoice::factory()->raw([
         'items' => [
@@ -573,6 +632,23 @@ test('create invoice with tax per item ignores empty placeholder tax row', funct
     ]);
 });
 
+test('rejects a nonzero per-item placeholder tax row', function () {
+    $invoice = Invoice::factory()->raw([
+        'items' => [
+            InvoiceItem::factory()->raw([
+                'taxes' => [[
+                    'tax_type_id' => 0,
+                    'amount' => 1,
+                ]],
+            ]),
+        ],
+    ]);
+
+    postJson('api/v1/invoices', $invoice)
+        ->assertUnprocessable()
+        ->assertJsonValidationErrors('items.0.taxes.0.amount');
+});
+
 test('create invoice with EUR currency', function () {
     $invoice = Invoice::factory()
         ->raw([
diff --git a/tests/Feature/Admin/RecurringInvoiceTest.php b/tests/Feature/Admin/RecurringInvoiceTest.php
index d3827b06..37a2cfb2 100644
--- a/tests/Feature/Admin/RecurringInvoiceTest.php
+++ b/tests/Feature/Admin/RecurringInvoiceTest.php
@@ -1,6 +1,7 @@
 <?php
 
 use App\Domains\Accounts\Models\User;
+use App\Domains\Sales\Application\RecurringInvoiceService;
 use App\Domains\Sales\Http\Controllers\Company\RecurringInvoiceController;
 use App\Domains\Sales\Http\Requests\RecurringInvoiceRequest;
 use App\Domains\Sales\Models\InvoiceItem;
@@ -60,6 +61,60 @@ test('store recurring invoice', function () {
     $this->assertDatabaseHas('recurring_invoices', $recurringInvoice);
 });
 
+test('rejects a nonzero per-item placeholder tax row', function () {
+    $recurringInvoice = RecurringInvoice::factory()->raw([
+        'items' => [
+            InvoiceItem::factory()->raw([
+                'taxes' => [[
+                    'tax_type_id' => 0,
+                    'amount' => 1,
+                ]],
+            ]),
+        ],
+    ]);
+
+    postJson('api/v1/recurring-invoices', $recurringInvoice)
+        ->assertUnprocessable()
+        ->assertJsonValidationErrors('items.0.taxes.0.amount');
+});
+
+test('allows a zero-valued per-item placeholder tax row', function () {
+    $recurringInvoice = RecurringInvoice::factory()->raw([
+        'items' => [
+            InvoiceItem::factory()->raw([
+                'taxes' => [[
+                    'tax_type_id' => 0,
+                    'amount' => 0,
+                ]],
+            ]),
+        ],
+    ]);
+
+    postJson('api/v1/recurring-invoices', $recurringInvoice)
+        ->assertCreated();
+});
+
+test('generated invoices retain the recurring template tax-included semantics', function () {
+    $recurringInvoice = RecurringInvoice::factory()->create([
+        'starts_at' => Carbon::yesterday(),
+        'limit_by' => RecurringInvoice::NONE,
+        'tax_included' => true,
+        'sub_total' => 10000,
+        'tax' => 2019,
+        'total' => 10119,
+        'due_amount' => 10119,
+    ]);
+
+    app(RecurringInvoiceService::class)->generateInvoice($recurringInvoice);
+
+    $this->assertDatabaseHas('invoices', [
+        'recurring_invoice_id' => $recurringInvoice->id,
+        'tax_included' => 1,
+        'tax' => 2019,
+        'total' => 10119,
+    ]);
+});
+
 test('get recurring invoice', function () {
     $recurringInvoice = RecurringInvoice::factory()->create();
 
diff --git a/tests/Feature/Admin/TaxTypeTest.php b/tests/Feature/Admin/TaxTypeTest.php
index c5e74dc9..d6bb206b 100644
--- a/tests/Feature/Admin/TaxTypeTest.php
+++ b/tests/Feature/Admin/TaxTypeTest.php
@@ -210,6 +210,20 @@ test('creates a non-compound tax type when compound_tax is explicitly false', fu
     ]);
 });
 
+test('creates a non-compound tax type when compound_tax is omitted', function () {
+    $taxType = TaxType::factory()->raw();
+    unset($taxType['compound_tax']);
+
+    postJson('api/v1/tax-types', $taxType)
+        ->assertStatus(201)
+        ->assertJsonPath('data.compound_tax', false);
+
+    $this->assertDatabaseHas('tax_types', [
+        'name' => $taxType['name'],
+        'compound_tax' => 0,
+    ]);
+});
+
 test('updates a tax type to explicitly disable compound tax', function () {
     $taxType = TaxType::factory()->create([
         'compound_tax' => true,
@@ -258,3 +272,100 @@ test('rejects non-boolean compound_tax values', function () {
         ->assertUnprocessable()
         ->assertJsonValidationErrors('compound_tax');
 });
+
+test('rejects null compound_tax values', function () {
+    $taxType = TaxType::factory()->raw([
+        'compound_tax' => null,
+    ]);
+
+    postJson('api/v1/tax-types', $taxType)
+        ->assertUnprocessable()
+        ->assertJsonValidationErrors('compound_tax');
+});
+
+test('rejects null compound_tax values on update', function () {
+    $taxType = TaxType::factory()->create([
+        'compound_tax' => true,
+    ]);
+
+    $payload = TaxType::factory()->raw([
+        'compound_tax' => null,
+    ]);
+
+    putJson("api/v1/tax-types/{$taxType->id}", $payload)
+        ->assertUnprocessable()
+        ->assertJsonValidationErrors('compound_tax');
+
+    $this->assertDatabaseHas('tax_types', [
+        'id' => $taxType->id,
+        'compound_tax' => 1,
+    ]);
+});
+
+test('rejects compound fixed tax types', function () {
+    $taxType = TaxType::factory()->raw([
+        'calculation_type' => 'fixed',
+        'percent' => null,
+        'fixed_amount' => 500,
+        'compound_tax' => true,
+    ]);
+
+    postJson('api/v1/tax-types', $taxType)
+        ->assertUnprocessable()
+        ->assertJsonValidationErrors('compound_tax');
+});
+
+test('rejects compound purchase tax types', function () {
+    $taxType = TaxType::factory()->raw([
+        'transaction_type' => TaxType::TRANSACTION_TYPE_PURCHASES,
+        'compound_tax' => true,
+    ]);
+
+    postJson('api/v1/tax-types', $taxType)
+        ->assertUnprocessable()
+        ->assertJsonValidationErrors('compound_tax');
+});
+
+test('rejects a type change that leaves compound tax enabled', function () {
+    $taxType = TaxType::factory()->create([
+        'compound_tax' => true,
+        'calculation_type' => 'percentage',
+        'transaction_type' => TaxType::TRANSACTION_TYPE_SALES,
+    ]);
+
+    $payload = TaxType::factory()->raw([
+        'calculation_type' => 'fixed',
+        'percent' => null,
+        'fixed_amount' => 500,
+    ]);
+    unset($payload['compound_tax']);
+
+    putJson("api/v1/tax-types/{$taxType->id}", $payload)
+        ->assertUnprocessable()
+        ->assertJsonValidationErrors('compound_tax');
+});
+
+test('allows clearing compound tax while changing its type', function () {
+    $taxType = TaxType::factory()->create([
+        'compound_tax' => true,
+        'calculation_type' => 'percentage',
+        'transaction_type' => TaxType::TRANSACTION_TYPE_SALES,
+    ]);
+
+    $payload = TaxType::factory()->raw([
+        'calculation_type' => 'fixed',
+        'percent' => null,
+        'fixed_amount' => 500,
+        'compound_tax' => false,
+    ]);
+
+    putJson("api/v1/tax-types/{$taxType->id}", $payload)
+        ->assertOk()
+        ->assertJsonPath('data.compound_tax', false);
+
+    $this->assertDatabaseHas('tax_types', [
+        'id' => $taxType->id,
+        'calculation_type' => 'fixed',
+        'compound_tax' => 0,
+    ]);
+});
diff --git a/tests/Unit/DocumentTotalsTest.php b/tests/Unit/DocumentTotalsTest.php
index f105266c..3ebe8f7f 100644
--- a/tests/Unit/DocumentTotalsTest.php
+++ b/tests/Unit/DocumentTotalsTest.php
@@ -28,8 +28,8 @@ test('applies document discount and document-level tax', function () {
 test('uses per-item taxes (not document taxes) when tax_per_item is YES', function () {
     $totals = DocumentTotals::compute(
         [
-            ['price' => 1000, 'quantity' => 1, 'taxes' => [['amount' => 100]]],
-            ['price' => 2000, 'quantity' => 1, 'taxes' => [['amount' => 200]]],
+            ['price' => 1000, 'quantity' => 1, 'taxes' => [['tax_type_id' => 1, 'amount' => 100]]],
+            ['price' => 2000, 'quantity' => 1, 'taxes' => [['tax_type_id' => 2, 'amount' => 200]]],
         ],
         [['amount' => 9999]],
         0, 'YES', false, 'YES'
@@ -77,7 +77,7 @@ test('supports negative quantities', function () {
     expect($totals['sub_total'])->toBe(-150)->and($totals['total'])->toBe(-150);
 });
 
-test('sums a compound tax line just like any other document-level tax line', function () {
+test('calculates exclusive document-level compound tax totals', function () {
     $totals = DocumentTotals::compute(
         [['price' => 10000, 'quantity' => 1]],
         [['amount' => 1900], ['amount' => 119, 'compound_tax' => true]],
@@ -87,3 +87,49 @@ test('sums a compound tax line just like any other document-level tax line', fun
     expect($totals['tax'])->toBe(2019)
         ->and($totals['total'])->toBe(12019);
 });
+
+test('keeps simple taxes inside an inclusive document total while adding compound taxes', function () {
+    $totals = DocumentTotals::compute(
+        [['price' => 11900, 'quantity' => 1]],
+        [['amount' => 1900], ['amount' => 119, 'compound_tax' => true]],
+        0, 'NO', true, 'NO'
+    );
+
+    expect($totals['tax'])->toBe(2019)
+        ->and($totals['total'])->toBe(12019);
+});
+
+test('calculates exclusive per-item compound tax totals and ignores the UI placeholder', function () {
+    $totals = DocumentTotals::compute(
+        [[
+            'price' => 10000,
+            'quantity' => 1,
+            'taxes' => [
+                ['tax_type_id' => 1, 'amount' => 1900],
+                ['tax_type_id' => 2, 'amount' => 119, 'compound_tax' => true],
+                ['tax_type_id' => 0, 'amount' => 0],
+            ],
+        ]],
+        [], 0, 'YES', false, 'NO'
+    );
+
+    expect($totals['tax'])->toBe(2019)
+        ->and($totals['total'])->toBe(12019);
+});
+
+test('keeps simple per-item taxes inside an inclusive total while adding compound taxes', function () {
+    $totals = DocumentTotals::compute(
+        [[
+            'price' => 11900,
+            'quantity' => 1,
+            'taxes' => [
+                ['tax_type_id' => 1, 'amount' => 1900],
+                ['tax_type_id' => 2, 'amount' => 119, 'compound_tax' => true],
+            ],
+        ]],
+        [], 0, 'YES', true, 'NO'
+    );
+
+    expect($totals['tax'])->toBe(2019)
+        ->and($totals['total'])->toBe(12019);
+});