To make a customer Tax Exempt,

1. Click the Customers tab.
2. Click a customer's name to open their profile.
3. In the upper right, click Edit.
   
    
4. In the CUSTOMER SETTINGS section, check the Tax Free box.
   
    
5. If you are using the QuickBooks Online integration, this will cause a QuickBooks Tax Exemption Reason dropdown to appear (those not using QuickBooks Online will not see this). You must select a reason for the customer or else you will get this error when trying to sync the customer: "Actual QuickBooks Error: A business validation error has occurred while processing your request: Business Validation Error: Tax Exemption Reason should be specified incase customer is marked as not taxable." If this dropdown does not appear when you check the Tax Free box, contact support and let them know they need to set qbo_partner_tax_enabled to true in your account.
6. In the upper right, click Save Changes.

The customer will now be tax exempt on transactions.