You are able to control whether taxes are applied at the item level or customer level. So for instance if a customer is taxable, but the item is not then adding that item for that customer to an order will not apply taxes. The table below illustrates all possible scenarios for adding an item to an order:
Customer | Item | Taxes Are Applied? |
Taxable | Taxable | Applied |
Taxable | Non-Taxable | Not Applied |
Non-Taxable | Taxable | Not Applied |
Non-Taxable | Non-Taxable | Not Applied |
To change the Taxable flag on a customer you can either do it manually: