Try putting in your customers address, that worked for me.

Holy sh****! This is some bat sh***t crazy answer. If anybody reads this, please disregard MaryLandT's tax advise. She clearly has no idea about sales tax. What is this 50% bs? Anyway, disregard that incorrect information.

I have the same issue with the online version. 100% of the time the tax exempt customer gets the tax box checked in on the invoices. It is very irritating. 

I agree the Tax Exempt Customer issue is handled very poorly by QBO.   I just transitioned from QB for Mac which I had been using for about 20 years.  Today I did my first sales tax reporting and noticed the numbers weren't lining up between what I collected and my taxable sales totals.  I found I have the same problem listed here, the Taxable items on invoices to Tax Exempt Customers are being calculated into the Taxable Sales figures on the report instead of non-taxable sales.  This screws everything up.   This never happened QB for Mac.    I too, found the workaround where you have to pay attention to your Tax Exempt customers and uncheck each items check box on the invoice.  This Should be an automatic process for Tax Exempt customers.  It would see easy to code.  

I briefly read the one post where someone was saying is some jurisdictions some items may be exempt and some may not even with Tax Exempt customers, but even this should be easy to code,  You can put in an item "always taxable" or "taxable according to Customer status" very easy.  

We are paying a lot for your QBO service, much more than the desktop version compared year over year.  Please get it right!

That sucks and I hate QB On Line.  I started with QB 2008 and loved it.   Customer Service is non-existent, it is such a battle getting the correct department, then they act like they don't know what you are talking about.

I setup a new tax field with 0 percent being charged for "non taxable sales customers."  It shows up on the sales tax liability report as non-taxable sales. I then add that amount to the State Gross Total Sales. Sometimes it actually adds up with my P&L sales. You would think an outfit as big as Intuit would have a handle on these glitches without customers having to jump thru hoops. 

what do your sales tax liability reports look like when doing this?

if anyone comes up with a solution to the original question here please post. when creating long estimates and invoices and adding/changing, the simple task of unchecking the tax box for each client who is input as "non-taxable - resale" (the majority of my clients) becomes a very tedious and time consuming job, in addition to the hope of getting them all correct, even though the client is input correctly in the system as a non-taxable client.

It does seem ridiculous that they refuse to correct this issue for such a long time. (using QBO for Mac)

Looks like Intuit Quickbooks has still not addressed nor given an answer to this apparent bug.

Our question is simple when marking a customer as non tax, why are they still being charged tax on the invoice?

It adds in the tax line when normally the sales tax line is blank. On top of that when you erase it and save, thinking you have fixed it, it saves it with the tax. We should not have to do manual fixes(work arounds) for a product that we are paying astronomical rates for. We have been using QBO for over 10 years and have to do work arounds for several things. Now we are looking for different software but everything seems to be overpriced by incorporating features not needed for everyone. 

Hi there, SheffieldC916. I understand the impact of this behavior on your transactions. I'm joining this thread so I can share more details about this issue.

If a customer is listed as tax exempt and has a valid address, the tax exempt status won't apply to any invoices or sales receipts created for them. That being said, let me route you to the best available support so we can further investigate its root cause.

Here's how to reach out:

1. Go to the Help icon.
2. Click Contact Us.
3. Type in your concern in the dialogue box. Hit Let's talk.
4. You can either choose Start messaging or Get a Callback to get a representative.
5. Snap the Confirm my call button.

For more details on managing your sales tax and how we calculate it, you can check out the Set up and use automated sales tax in QuickBooks Online article. For your future references, you can also use custom rates to manually calculate taxes on invoices or receipts.

When it's time to file your sales tax return and record your tax payment, you can check out this article for the detailed steps and information: File your sales tax return and record sales tax payments in QuickBooks Online.

I'm only a few clicks away if you need assistance with your other QuickBooks tasks. It's always my pleasure to help you out again.

I have the same issue however it’s primarily when using iOS apps. I have noticed also that when entering a new client there’s no option that allows to make a client tax exempt in the iOS apps. For the amount of money paid for QBO Advanced, there’s no reason features should be limited when using the app whether it’s iPhone or iPad. The app is way too basic for the monthly cost. 

Making a client tax-exempt in the IOS would be incredibly valuable, Jska. I understand the significance of having such a feature.

There isn't a specific feature for making a client tax-exempt in the IOS apps. I suggest sending feedback to our Product Development team for evaluation. Your valuable insights will have an opportunity to be considered and reviewed

Here's how to submit feedback:
 

1. Go to the Gear menu and then select Feedback.
2. Type in your feature request in the description box.
3. Once done, click on Next.

Furthermore, you can check out this article that contains a comparison chart to give you more details about the available features in the QBO mobile app: Compare mobile app features.

This thread is still open if you need a hand with managing the sales tax feature. Just add the details in the comment section and I'll get back to give answers. I'm looking forward to assisting you again!

So it appears this will be almost 3 years worth of a problem, and there is still a tax issue. I will try to give an abbreviated version of my experience(s):

QBO Customer Service: I think I once got in touch with a representative that was truly helpful. All other times, a claim is filed, time passes either in hopes the customer forgets about the problem, or you get a generic reply (similar to the below) instead of a human reaching out to fully understand the situation. The email reply I received:

"Thank you for requesting updates on Tax-Exempt Customers have sales tax calculated.  Our engineers have determined this is working as designed. We appreciate your understanding and encourage you to share your concerns or ideas via the in-product Feedback tool.

Your solutions do not work. We always use the correct buttons when setting up customers. Even when we choose to unclick the "customer is taxable" button, tax still appears on invoices. Please stop using the textbook answers in your replies to customers' concerns. It just makes it worse. This is an issue. Please fix it.

We appreciate bringing this to our attention, @LNLBackflow.

We currently have an issue where QuickBooks would calculate sales taxes for tax-exempt customers. Our engineers have been notified and are now working on the case to fix this.In the meantime, we'll want to contact our support team so you'll be added to the list of affected users. You will be notified through email once a fix or a solution is available.Here's how to contact us:
 

1. In your QuickBooks Online company, go to Help (?).
2. Select either of these tabs:

• Assistant tab and type Talk to a human.
• Search tab and click on Contact us to connect with a support expert.

       3. Choose how you want to reach us (phone or chat).

For Plus, Essentials and Simple Start subscribers, support will be available M-F from 6 AM to 6 PM PT and Saturday 6 AM to 3 PM PT. For Advanced subscribers, you may contact support any time and any day. If you have some customers that may be in need of a sales tax refund, I'll add this article as a guide: Refund sales tax.

We appreciate your patience while we are working to resolve this issue. Our Community team is always here. Feel free to reach us out any time by leaving a reply.

Quickbooks, Are you actually reading the thread? We have talked to a human and we have left feedback which looks like going on three years now. 3 out of 4 QB employees are not even addressing the issues on this thread. You are going to be a real heap of trouble when a few people finally decide to pull the trigger and start a class action lawsuit for miscalculating tax or falsifying reports.

Your tax backend is buggy. Period.

I came here because every time I start a new invoice for a project for a customer that is tax exempt, it does not keep that setting. It marks the customer non exempt and this invoice shows up on my tax reports. I have to remember to manually correct the customer exempt status on EVERY SINGLE INVOICE.

Just fix this stuff already. Why is this okay over and over again?

This isn't what we want you to experience, Lmoore. 

I understand how frustrating it must be for you to have been dealing with this issue for such a prolonged period of time. It's completely understandable that you would want a resolution as soon as possible. I want to assure you that our team of engineers has initiated a thorough investigation into the matter, and I would like to share some updates with you.

As per checking here, the investigation about the tax-exempt customers, not being detected and acknowledged in QuickBooks Online is still ongoing. I also want to include that your contribution to providing information about affected users has been immensely valuable to our engineers. By doing so, you'll be prioritized and ensure that you receive timely updates regarding the progress of the investigation.

While I understand that you have already reached out to our team, I want to inform you that at this moment, the best course of action is to patiently await an update while there's still no documented workaround available. I understand the challenges you're facing, as this issue is causing interruptions in your work and adding to your workload. Please know that our dedicated Product Engineers are working diligently to expedite the resolution process and isolate the root cause of the problem. Their ultimate goal is to provide a permanent fix that will address the concerns of affected users like yourself. 

Additionally, here's an article that'll help you adjust your sales tax due if you use automated sales tax: Create or delete a sales tax adjustment in QuickBooks Online. 

I know these are trying times and I appreciate your patience while we work toward resolving this issue. In the meantime, if you have any other questions o concerns, please don't hesitate to let me know. I'm here to assist you in any way I can. 

The problem still persists.

We want to resolve this as much as you do, @99duckey.

I understand the importance of being able to calculate your sales taxes with ease.

Upon checking here on my end, the investigation concerning QuickBooks calculating sales tax for tax-exempt customers is still in progress. Rest assured, our engineers are aware of this and they’re doing their best to find a solution to fix it.

Thus, I encourage you to contact our Phone support team. They can add you to our notification list and you'll be notified via email once the update is available.

You might also want to check out this article to guide you in managing sales tax payments in QBO: Manage sales tax payments in QuickBooks Online

We appreciate your patience while waiting for this concern to be resolve. Feel free to post here if you have any questions about sales tax or any QuickBooks-related concerns.