On Cloud, you can mark an account as tax-exempt and exempt all opportunities created for the account from product and labor taxes.
If you want to know more about marking an account as tax-exempt, check out this article.
When an account is marked as tax-exempt, you will see that all quotes created for opportunities (both Project opportunities and Service opportunities) are marked as tax-exempt by default.
You will see the Tax-exempt option at the top of the quote set to ON. In the quote, you will see the following:
Item
The tax settings for the items in the catalog and the tax rates (Avalara-based or manual) specified when creating the opportunity do not apply.
All existing items, as well as new items added to it, show the "Taxable" option set to OFF. You can optionally set the Taxable option to ON and enable the Avalara-based or manual tax rate.
Service plan
The tax rate assigned to the service plan in the catalog does not apply. You can set a tax rate if needed.
Subscription
The tax settings for the subscription in the catalog, whether standalone or associated with a product, do not apply.
The subscription will show the "Taxable" option set to OFF. You can optionally set the Taxable option to ON and enable the Avalara-based or manual tax rate.
Adjustment
The tax settings for the adjustment do not apply.
The adjustment will show the "Taxable" option set to OFF. You can optionally set the Taxable option to ON and enable the Avalara-based or manual tax rate.
Here are some things you need to know to use the Tax-exempt feature effectively.
You can change the tax-exempt status of an individual quote in an opportunity. For example, you can have both tax-exempt and non-tax-exempt quotes in the opportunity.
If you duplicate a quote, the new version of the quote retains the tax-exempt status of the source quote.
When you change the account for an opportunity, Cloud compares the tax-exempt status of the source and target accounts. If all quotes in the opportunity do not have the same tax-exempt status as that of the target account, you will see a prompt to either set the tax-exempt status of the quotes to that of the target account or retain their status as-is.
When you change an account's tax-exempt status, the existing quotes will retain the old status. Only new quotes will be created with the new status.