diff --git a/tests/actions/PolicyTaxTest.ts b/tests/actions/PolicyTaxTest.ts
index 3899e0c2a24e..c35aea14e4f8 100644
--- a/tests/actions/PolicyTaxTest.ts
+++ b/tests/actions/PolicyTaxTest.ts
@@ -11,6 +11,7 @@ import waitForBatchedUpdates from '../utils/waitForBatchedUpdates';
 
 OnyxUpdateManager();
 describe('actions/PolicyTax', () => {
+    const fakePolicy: PolicyType = {...createRandomPolicy(0), taxRates: CONST.DEFAULT_TAX};
     beforeAll(() => {
         Onyx.init({
             keys: ONYXKEYS,
@@ -20,22 +21,21 @@ describe('actions/PolicyTax', () => {
     beforeEach(() => {
         // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
         global.fetch = TestHelper.getGlobalFetchMock();
-        return Onyx.clear().then(waitForBatchedUpdates);
+        return Onyx.clear()
+            .then(() => Onyx.set(`${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`, fakePolicy))
+            .then(waitForBatchedUpdates);
     });
 
     describe('SetPolicyCustomTaxName', () => {
         it('Set policy`s custom tax name', () => {
-            const fakePolicy: PolicyType = {...createRandomPolicy(0), taxRates: CONST.DEFAULT_TAX};
             const customTaxName = 'Custom tag name';
+            const originalCustomTaxName = fakePolicy?.taxRates?.name;
 
             // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
             fetch.pause();
+            Policy.setPolicyCustomTaxName(fakePolicy.id, customTaxName);
             return (
-                Onyx.set(`${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`, fakePolicy)
-                    .then(() => {
-                        Policy.setPolicyCustomTaxName(fakePolicy.id, customTaxName);
-                        return waitForBatchedUpdates();
-                    })
+                waitForBatchedUpdates()
                     .then(
                         () =>
                             new Promise<void>((resolve) => {
@@ -72,20 +72,65 @@ describe('actions/PolicyTax', () => {
                     )
             );
         });
+        it('Reset policy`s custom tax name when API returns an error', () => {
+            const customTaxName = 'Custom tag name';
+            const originalCustomTaxName = fakePolicy?.taxRates?.name;
+
+            // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+            fetch.pause();
+            Policy.setPolicyCustomTaxName(fakePolicy.id, customTaxName);
+            return waitForBatchedUpdates()
+                .then(
+                    () =>
+                        new Promise<void>((resolve) => {
+                            const connectionID = Onyx.connect({
+                                key: `${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`,
+                                waitForCollectionCallback: false,
+                                callback: (policy) => {
+                                    Onyx.disconnect(connectionID);
+                                    expect(policy?.taxRates?.name).toBe(customTaxName);
+                                    expect(policy?.taxRates?.pendingFields?.name).toBe(CONST.RED_BRICK_ROAD_PENDING_ACTION.UPDATE);
+                                    expect(policy?.taxRates?.errorFields).toBeFalsy();
+                                    resolve();
+                                },
+                            });
+                        }),
+                )
+                .then(() => {
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    fetch.fail();
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    return fetch.resume();
+                })
+                .then(waitForBatchedUpdates)
+                .then(
+                    () =>
+                        new Promise<void>((resolve) => {
+                            const connectionID = Onyx.connect({
+                                key: `${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`,
+                                waitForCollectionCallback: false,
+                                callback: (policy) => {
+                                    Onyx.disconnect(connectionID);
+                                    expect(policy?.taxRates?.name).toBe(originalCustomTaxName);
+                                    expect(policy?.taxRates?.pendingFields?.name).toBeFalsy();
+                                    expect(policy?.taxRates?.errorFields?.name).toBeTruthy();
+                                    resolve();
+                                },
+                            });
+                        }),
+                );
+        });
     });
+
     describe('SetPolicyCurrencyDefaultTax', () => {
         it('Set policy`s currency default tax', () => {
-            const fakePolicy: PolicyType = {...createRandomPolicy(0), taxRates: CONST.DEFAULT_TAX};
             const taxCode = 'id_TAX_RATE_1';
 
             // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
             fetch.pause();
+            Policy.setWorkspaceCurrencyDefault(fakePolicy.id, taxCode);
             return (
-                Onyx.set(`${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`, fakePolicy)
-                    .then(() => {
-                        Policy.setWorkspaceCurrencyDefault(fakePolicy.id, taxCode);
-                        return waitForBatchedUpdates();
-                    })
+                waitForBatchedUpdates()
                     .then(
                         () =>
                             new Promise<void>((resolve) => {
@@ -122,20 +167,64 @@ describe('actions/PolicyTax', () => {
                     )
             );
         });
+        it('Reset policy`s currency default tax when API returns an error', () => {
+            const taxCode = 'id_TAX_RATE_1';
+            const originalDefaultExternalID = fakePolicy?.taxRates?.defaultExternalID;
+
+            // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+            fetch.pause();
+            Policy.setWorkspaceCurrencyDefault(fakePolicy.id, taxCode);
+            return waitForBatchedUpdates()
+                .then(
+                    () =>
+                        new Promise<void>((resolve) => {
+                            const connectionID = Onyx.connect({
+                                key: `${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`,
+                                waitForCollectionCallback: false,
+                                callback: (policy) => {
+                                    Onyx.disconnect(connectionID);
+                                    expect(policy?.taxRates?.defaultExternalID).toBe(taxCode);
+                                    expect(policy?.taxRates?.pendingFields?.defaultExternalID).toBe(CONST.RED_BRICK_ROAD_PENDING_ACTION.UPDATE);
+                                    expect(policy?.taxRates?.errorFields).toBeFalsy();
+                                    resolve();
+                                },
+                            });
+                        }),
+                )
+                .then(() => {
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    fetch.fail();
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    return fetch.resume();
+                })
+                .then(waitForBatchedUpdates)
+                .then(
+                    () =>
+                        new Promise<void>((resolve) => {
+                            const connectionID = Onyx.connect({
+                                key: `${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`,
+                                waitForCollectionCallback: false,
+                                callback: (policy) => {
+                                    Onyx.disconnect(connectionID);
+                                    expect(policy?.taxRates?.defaultExternalID).toBe(originalDefaultExternalID);
+                                    expect(policy?.taxRates?.pendingFields?.defaultExternalID).toBeFalsy();
+                                    expect(policy?.taxRates?.errorFields?.defaultExternalID).toBeTruthy();
+                                    resolve();
+                                },
+                            });
+                        }),
+                );
+        });
     });
     describe('SetPolicyForeignCurrencyDefaultTax', () => {
         it('Set policy`s foreign currency default', () => {
-            const fakePolicy: PolicyType = {...createRandomPolicy(0), taxRates: CONST.DEFAULT_TAX};
             const taxCode = 'id_TAX_RATE_1';
 
             // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
             fetch.pause();
+            Policy.setForeignCurrencyDefault(fakePolicy.id, taxCode);
             return (
-                Onyx.set(`${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`, fakePolicy)
-                    .then(() => {
-                        Policy.setForeignCurrencyDefault(fakePolicy.id, taxCode);
-                        return waitForBatchedUpdates();
-                    })
+                waitForBatchedUpdates()
                     .then(
                         () =>
                             new Promise<void>((resolve) => {
@@ -173,10 +262,59 @@ describe('actions/PolicyTax', () => {
                     )
             );
         });
+        it('Reset policy`s foreign currency default when API returns an error', () => {
+            const taxCode = 'id_TAX_RATE_1';
+            const originalDefaultForeignCurrencyID = fakePolicy?.taxRates?.foreignTaxDefault;
+
+            // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+            fetch.pause();
+            Policy.setForeignCurrencyDefault(fakePolicy.id, taxCode);
+            return waitForBatchedUpdates()
+                .then(
+                    () =>
+                        new Promise<void>((resolve) => {
+                            const connectionID = Onyx.connect({
+                                key: `${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`,
+                                waitForCollectionCallback: false,
+                                callback: (policy) => {
+                                    Onyx.disconnect(connectionID);
+                                    expect(policy?.taxRates?.foreignTaxDefault).toBe(taxCode);
+                                    expect(policy?.taxRates?.pendingFields?.foreignTaxDefault).toBe(CONST.RED_BRICK_ROAD_PENDING_ACTION.UPDATE);
+                                    expect(policy?.taxRates?.errorFields).toBeFalsy();
+                                    resolve();
+                                },
+                            });
+                        }),
+                )
+
+                .then(() => {
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    fetch.fail();
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    return fetch.resume();
+                })
+                .then(waitForBatchedUpdates)
+                .then(
+                    () =>
+                        new Promise<void>((resolve) => {
+                            const connectionID = Onyx.connect({
+                                key: `${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`,
+                                waitForCollectionCallback: false,
+                                callback: (policy) => {
+                                    Onyx.disconnect(connectionID);
+                                    // Check if the policy pendingFields was cleared
+                                    expect(policy?.taxRates?.foreignTaxDefault).toBe(originalDefaultForeignCurrencyID);
+                                    expect(policy?.taxRates?.pendingFields?.foreignTaxDefault).toBeFalsy();
+                                    expect(policy?.taxRates?.errorFields?.foreignTaxDefault).toBeTruthy();
+                                    resolve();
+                                },
+                            });
+                        }),
+                );
+        });
     });
     describe('CreatePolicyTax', () => {
         it('Create a new tax', () => {
-            const fakePolicy: PolicyType = {...createRandomPolicy(0), taxRates: CONST.DEFAULT_TAX};
             const newTaxRate: TaxRate = {
                 name: 'Tax rate 2',
                 value: '2%',
@@ -185,12 +323,9 @@ describe('actions/PolicyTax', () => {
 
             // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
             fetch.pause();
+            createPolicyTax(fakePolicy.id, newTaxRate);
             return (
-                Onyx.set(`${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`, fakePolicy)
-                    .then(() => {
-                        createPolicyTax(fakePolicy.id, newTaxRate);
-                        return waitForBatchedUpdates();
-                    })
+                waitForBatchedUpdates()
                     .then(
                         () =>
                             new Promise<void>((resolve) => {
@@ -230,19 +365,68 @@ describe('actions/PolicyTax', () => {
                     )
             );
         });
+
+        it('Remove the optimistic tax if the API returns an error', () => {
+            const newTaxRate: TaxRate = {
+                name: 'Tax rate 2',
+                value: '2%',
+                code: 'id_TAX_RATE_2',
+            };
+
+            // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+            fetch.pause();
+            createPolicyTax(fakePolicy.id, newTaxRate);
+            return waitForBatchedUpdates()
+                .then(
+                    () =>
+                        new Promise<void>((resolve) => {
+                            const connectionID = Onyx.connect({
+                                key: `${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`,
+                                waitForCollectionCallback: false,
+                                callback: (policy) => {
+                                    Onyx.disconnect(connectionID);
+                                    const createdTax = policy?.taxRates?.taxes?.[newTaxRate.code ?? ''];
+                                    expect(createdTax?.code).toBe(newTaxRate.code);
+                                    expect(createdTax?.name).toBe(newTaxRate.name);
+                                    expect(createdTax?.value).toBe(newTaxRate.value);
+                                    expect(createdTax?.pendingAction).toBe(CONST.RED_BRICK_ROAD_PENDING_ACTION.ADD);
+                                    resolve();
+                                },
+                            });
+                        }),
+                )
+                .then(() => {
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    fetch.fail();
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    return fetch.resume();
+                })
+                .then(waitForBatchedUpdates)
+                .then(
+                    () =>
+                        new Promise<void>((resolve) => {
+                            const connectionID = Onyx.connect({
+                                key: `${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`,
+                                waitForCollectionCallback: false,
+                                callback: (policy) => {
+                                    Onyx.disconnect(connectionID);
+                                    const createdTax = policy?.taxRates?.taxes?.[newTaxRate.code ?? ''];
+                                    expect(createdTax?.errors).toBeTruthy();
+                                    resolve();
+                                },
+                            });
+                        }),
+                );
+        });
     });
     describe('SetPolicyTaxesEnabled', () => {
         it('Disable policy`s taxes', () => {
-            const fakePolicy: PolicyType = {...createRandomPolicy(0), taxRates: CONST.DEFAULT_TAX};
             const disableTaxID = 'id_TAX_RATE_1';
             // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
             fetch.pause();
+            setPolicyTaxesEnabled(fakePolicy.id, [disableTaxID], false);
             return (
-                Onyx.set(`${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`, fakePolicy)
-                    .then(() => {
-                        setPolicyTaxesEnabled(fakePolicy.id, [disableTaxID], false);
-                        return waitForBatchedUpdates();
-                    })
+                waitForBatchedUpdates()
                     .then(
                         () =>
                             new Promise<void>((resolve) => {
@@ -282,21 +466,68 @@ describe('actions/PolicyTax', () => {
                     )
             );
         });
+
+        it('Disable policy`s taxes but API returns an error, then enable policy`s taxes again', () => {
+            const disableTaxID = 'id_TAX_RATE_1';
+            // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+            fetch.pause();
+            setPolicyTaxesEnabled(fakePolicy.id, [disableTaxID], false);
+            const originalTaxes = {...fakePolicy?.taxRates?.taxes};
+            return waitForBatchedUpdates()
+                .then(
+                    () =>
+                        new Promise<void>((resolve) => {
+                            const connectionID = Onyx.connect({
+                                key: `${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`,
+                                waitForCollectionCallback: false,
+                                callback: (policy) => {
+                                    Onyx.disconnect(connectionID);
+                                    const disabledTax = policy?.taxRates?.taxes?.[disableTaxID];
+                                    expect(disabledTax?.isDisabled).toBeTruthy();
+                                    expect(disabledTax?.pendingFields?.isDisabled).toBe(CONST.RED_BRICK_ROAD_PENDING_ACTION.UPDATE);
+                                    expect(disabledTax?.errorFields?.isDisabled).toBeFalsy();
+
+                                    resolve();
+                                },
+                            });
+                        }),
+                )
+                .then(() => {
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    fetch.fail();
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    return fetch.resume();
+                })
+                .then(waitForBatchedUpdates)
+                .then(
+                    () =>
+                        new Promise<void>((resolve) => {
+                            const connectionID = Onyx.connect({
+                                key: `${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`,
+                                waitForCollectionCallback: false,
+                                callback: (policy) => {
+                                    Onyx.disconnect(connectionID);
+                                    const disabledTax = policy?.taxRates?.taxes?.[disableTaxID];
+                                    expect(disabledTax?.isDisabled).toBe(!!originalTaxes[disableTaxID].isDisabled);
+                                    expect(disabledTax?.errorFields?.isDisabled).toBeTruthy();
+                                    expect(disabledTax?.pendingFields?.isDisabled).toBeFalsy();
+                                    resolve();
+                                },
+                            });
+                        }),
+                );
+        });
     });
 
     describe('RenamePolicyTax', () => {
         it('Rename tax', () => {
-            const fakePolicy: PolicyType = {...createRandomPolicy(0), taxRates: CONST.DEFAULT_TAX};
             const taxID = 'id_TAX_RATE_1';
             const newTaxName = 'Tax rate 1 updated';
             // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
             fetch.pause();
+            renamePolicyTax(fakePolicy.id, taxID, newTaxName);
             return (
-                Onyx.set(`${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`, fakePolicy)
-                    .then(() => {
-                        renamePolicyTax(fakePolicy.id, taxID, newTaxName);
-                        return waitForBatchedUpdates();
-                    })
+                waitForBatchedUpdates()
                     .then(
                         () =>
                             new Promise<void>((resolve) => {
@@ -336,21 +567,69 @@ describe('actions/PolicyTax', () => {
                     )
             );
         });
+
+        it('Rename tax but API returns an error, then recover the original tax`s name', () => {
+            const taxID = 'id_TAX_RATE_1';
+            const newTaxName = 'Tax rate 1 updated';
+            const originalTaxRate = {...fakePolicy?.taxRates?.taxes[taxID]};
+            // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+            fetch.pause();
+            renamePolicyTax(fakePolicy.id, taxID, newTaxName);
+            return waitForBatchedUpdates()
+                .then(
+                    () =>
+                        new Promise<void>((resolve) => {
+                            const connectionID = Onyx.connect({
+                                key: `${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`,
+                                waitForCollectionCallback: false,
+                                callback: (policy) => {
+                                    Onyx.disconnect(connectionID);
+                                    const updatedTax = policy?.taxRates?.taxes?.[taxID];
+                                    expect(updatedTax?.name).toBe(newTaxName);
+                                    expect(updatedTax?.pendingFields?.name).toBe(CONST.RED_BRICK_ROAD_PENDING_ACTION.UPDATE);
+                                    expect(updatedTax?.errorFields?.name).toBeFalsy();
+
+                                    resolve();
+                                },
+                            });
+                        }),
+                )
+                .then(() => {
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    fetch.fail();
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    return fetch.resume();
+                })
+                .then(waitForBatchedUpdates)
+                .then(
+                    () =>
+                        new Promise<void>((resolve) => {
+                            const connectionID = Onyx.connect({
+                                key: `${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`,
+                                waitForCollectionCallback: false,
+                                callback: (policy) => {
+                                    Onyx.disconnect(connectionID);
+                                    const updatedTax = policy?.taxRates?.taxes?.[taxID];
+                                    expect(updatedTax?.name).toBe(originalTaxRate.name);
+                                    expect(updatedTax?.errorFields?.name).toBeTruthy();
+                                    expect(updatedTax?.pendingFields?.name).toBeFalsy();
+                                    resolve();
+                                },
+                            });
+                        }),
+                );
+        });
     });
     describe('UpdatePolicyTaxValue', () => {
         it('Update tax`s value', () => {
-            const fakePolicy: PolicyType = {...createRandomPolicy(0), taxRates: CONST.DEFAULT_TAX};
             const taxID = 'id_TAX_RATE_1';
             const newTaxValue = 10;
             const stringTaxValue = `${newTaxValue}%`;
             // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
             fetch.pause();
+            updatePolicyTaxValue(fakePolicy.id, taxID, newTaxValue);
             return (
-                Onyx.set(`${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`, fakePolicy)
-                    .then(() => {
-                        updatePolicyTaxValue(fakePolicy.id, taxID, newTaxValue);
-                        return waitForBatchedUpdates();
-                    })
+                waitForBatchedUpdates()
                     .then(
                         () =>
                             new Promise<void>((resolve) => {
@@ -390,21 +669,70 @@ describe('actions/PolicyTax', () => {
                     )
             );
         });
+
+        it('Update tax`s value but API returns an error, then recover the original tax`s value', () => {
+            const taxID = 'id_TAX_RATE_1';
+            const newTaxValue = 10;
+            const originalTaxRate = {...fakePolicy?.taxRates?.taxes[taxID]};
+            const stringTaxValue = `${newTaxValue}%`;
+            // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+            fetch.pause();
+            updatePolicyTaxValue(fakePolicy.id, taxID, newTaxValue);
+            return waitForBatchedUpdates()
+                .then(
+                    () =>
+                        new Promise<void>((resolve) => {
+                            const connectionID = Onyx.connect({
+                                key: `${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`,
+                                waitForCollectionCallback: false,
+                                callback: (policy) => {
+                                    Onyx.disconnect(connectionID);
+                                    const updatedTax = policy?.taxRates?.taxes?.[taxID];
+                                    expect(updatedTax?.value).toBe(stringTaxValue);
+                                    expect(updatedTax?.pendingFields?.value).toBe(CONST.RED_BRICK_ROAD_PENDING_ACTION.UPDATE);
+                                    expect(updatedTax?.errorFields?.value).toBeFalsy();
+
+                                    resolve();
+                                },
+                            });
+                        }),
+                )
+                .then(() => {
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    fetch.fail();
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    return fetch.resume();
+                })
+                .then(waitForBatchedUpdates)
+                .then(
+                    () =>
+                        new Promise<void>((resolve) => {
+                            const connectionID = Onyx.connect({
+                                key: `${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`,
+                                waitForCollectionCallback: false,
+                                callback: (policy) => {
+                                    Onyx.disconnect(connectionID);
+                                    const updatedTax = policy?.taxRates?.taxes?.[taxID];
+                                    expect(updatedTax?.value).toBe(originalTaxRate.value);
+                                    expect(updatedTax?.errorFields?.value).toBeTruthy();
+                                    expect(updatedTax?.pendingFields?.value).toBeFalsy();
+                                    resolve();
+                                },
+                            });
+                        }),
+                );
+        });
     });
     describe('DeletePolicyTaxes', () => {
         it('Delete tax that is not foreignTaxDefault', () => {
-            const fakePolicy: PolicyType = {...createRandomPolicy(0), taxRates: CONST.DEFAULT_TAX};
             const foreignTaxDefault = fakePolicy?.taxRates?.foreignTaxDefault;
             const taxID = 'id_TAX_RATE_1';
 
             // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
             fetch.pause();
+            deletePolicyTaxes(fakePolicy.id, [taxID]);
             return (
-                Onyx.set(`${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`, fakePolicy)
-                    .then(() => {
-                        deletePolicyTaxes(fakePolicy.id, [taxID]);
-                        return waitForBatchedUpdates();
-                    })
+                waitForBatchedUpdates()
                     .then(
                         () =>
                             new Promise<void>((resolve) => {
@@ -461,7 +789,7 @@ describe('actions/PolicyTax', () => {
             // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
             fetch.pause();
             return (
-                Onyx.set(`${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`, fakePolicy)
+                Onyx.merge(`${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`, {taxRates: {foreignTaxDefault: 'id_TAX_RATE_1'}})
                     .then(() => {
                         deletePolicyTaxes(fakePolicy.id, [taxID]);
                         return waitForBatchedUpdates();
@@ -507,5 +835,59 @@ describe('actions/PolicyTax', () => {
                     )
             );
         });
+
+        it('Delete tax that is not foreignTaxDefault but API return an error, then recover the delated tax', () => {
+            const foreignTaxDefault = fakePolicy?.taxRates?.foreignTaxDefault;
+            const taxID = 'id_TAX_RATE_1';
+
+            // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+            fetch.pause();
+            deletePolicyTaxes(fakePolicy.id, [taxID]);
+            return waitForBatchedUpdates()
+                .then(
+                    () =>
+                        new Promise<void>((resolve) => {
+                            const connectionID = Onyx.connect({
+                                key: `${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`,
+                                waitForCollectionCallback: false,
+                                callback: (policy) => {
+                                    Onyx.disconnect(connectionID);
+                                    const taxRates = policy?.taxRates;
+                                    const deletedTax = taxRates?.taxes?.[taxID];
+                                    expect(taxRates?.pendingFields?.foreignTaxDefault).toBeFalsy();
+                                    expect(taxRates?.foreignTaxDefault).toBe(foreignTaxDefault);
+                                    expect(deletedTax?.pendingAction).toBe(CONST.RED_BRICK_ROAD_PENDING_ACTION.DELETE);
+                                    expect(deletedTax?.errors).toBeFalsy();
+                                    resolve();
+                                },
+                            });
+                        }),
+                )
+                .then(() => {
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    fetch.fail();
+                    // @ts-expect-error TODO: Remove this once TestHelper (https://github.com/Expensify/App/issues/25318) is migrated to TypeScript.
+                    return fetch.resume();
+                })
+                .then(waitForBatchedUpdates)
+                .then(
+                    () =>
+                        new Promise<void>((resolve) => {
+                            const connectionID = Onyx.connect({
+                                key: `${ONYXKEYS.COLLECTION.POLICY}${fakePolicy.id}`,
+                                waitForCollectionCallback: false,
+                                callback: (policy) => {
+                                    Onyx.disconnect(connectionID);
+                                    const taxRates = policy?.taxRates;
+                                    const deletedTax = taxRates?.taxes?.[taxID];
+                                    expect(taxRates?.pendingFields?.foreignTaxDefault).toBeFalsy();
+                                    expect(deletedTax?.pendingAction).toBeFalsy();
+                                    expect(deletedTax?.errors).toBeTruthy();
+                                    resolve();
+                                },
+                            });
+                        }),
+                );
+        });
     });
 });