How can I charge sales tax only on a specific category? What do I do if there are certain items that are tax exempt in my state?
Unfortunately, there is no easy way to do this if you are running Magento CE 1.7 and below. In Magento CE 1.8, they have dealt with these and other tax issues, but for now this is the solution they provided.
First, you need to configure the appropriate tax rule for all categories in Magento. Then you can create a shopping cart price rule to deal with removing the tax from certain categories that are tax exempt. This follows the same steps as creating a coupon.
- Create a new Shopping Cart Price Rule for your exempt items. Go to Promotions -> Shopping Cart Price Rules. Click on Add New Rule.
- Let's say you want sales tax to be charged on everything except shoes. Your shopping cart price rule will remove the tax charged on shoes. See attached for how to configure the Conditions and Actions tabs on your Shopping Cart Price Rule.
What will happen is the customer will get charged the appropriate tax for all items and then receive a "discount" equal to the tax charged for the shoes. While this is not an ideal way to handle it, it is all that can be done in these versions of Magento.