Enable Tax Lookup on Sales Transaction = T > Not- Taxable tax code populates on the taxable sales transactions of customers with valid shipping addresses

On Setup > Accounting > Tax Setup, Enable Tax Lookup on Sales Transaction = T

Default Tax Code = (a default tax code is set other than -Not Taxable-)

On the customer record, Taxable = T

On the customer record > Address tab > Default Shipping Zip code is present

Tax Groups include the customer's zip code

Not- Taxable tax code populates on the taxable sales transactions of customers with valid shipping addresses

Solution :

Make sure that the nexus is on the Nexus tab of the subsidiary record (Setup > Company > Subsidiary > Nexus). If the nexus is not on the subsidiary record, even if the zip code is on the tax group the tax code will still default to -Not Taxable-.