I have a tax rule for only one state, all other shipping locations are exempt from the tax, the issue is that the shipping is being taxed in addition to the product.
If I choose tax per product then everything gets taxed regardless of the state rule. If I choose tax by bill then the shipping gets taxed. We're also using the ProShip Plugin...if that helps.
bmac,
Hi just put up an image of your tax selling - we can solve this most times by seeing your zip code settings, groups and tax rule.