When a customer is tax exempt, one should not rebill the customer for recoverable taxes paid on their behalf but instead recover those taxes from the tax agency. Zoho does this incorrectly, in violation of accounting rules (certainly in Canada, probably elsewhere for all recoverable value added taxes).

Example:
-Create a tax exempt customer
-Create a taxable expense associated with this tax-exempt customer
-Create an invoice to re-bill for the expense
-The expense will be entered as a taxable line item, with no option to change

As a workaround, one can set a tax for the customer, which curiously enables changing the taxable status of each line item. Then one can change the taxation status of line item to exempt the customer from taxes.