A Customer can be setup to be Taxable, Non Taxable (on Taxable items), or Never Taxed on anything through "Customer Entry" in Accounts Receivable (6.1.1 fields 19 and 20). A Part Number may be set as Taxable, Never Taxed, or defaulted to the customer status through "Inventory Entry" in Inventory (5.1.1 field 5).

There are many combinations for taxing using ACCOUNTS RECEIVABLE and INVENTORY.