Yes, you should sand before the clear coat.

I use 600 between coats to level the finish, and 1200 before and between clear coats.
You would only need to wet sand the final coat as prep before buffing and polishing. Wet sanding is not necessary between coats.
I like to get a good clear coat on, sand to 1200, apply decals, and clear coat again.
When the final clear coat is well-cured, I'll give it a brisk rub down with 3M Finesse-it and a soft cloth, mostly to remove the inevitable overspray.
HTH