You can exclude certain items from being taxed at the category and product level.

 

Excluding all products in a category

 

1. Put the category record in edit mode.

 

2. Set the "Tax Items" field to "No"

 

3. Click 

 

 

 

Excluding individual products

 

1. Put the product record in edit mode.

 

2. Set the "Tax Item" field to "No"

 

3. Click