How are you "noting" that items and customers are exempt?  Are you using the exemption settings on the Taxes tabs of the respective ledgers?

The program is designed to show a default tax code if the customer is set up with one, but each item and each customer can be marked as exempt from specific taxes.

For example, GST exempt customers will override taxable items and not calculate any tax.  Tax exempt items will override taxable customers and not calculate any tax.  However, in both cases, G can still be the tax code on that line item, and the tax amount is calculated as $0.00.

At least, this is how the program worked when I checked this stuff about 5 years ago.

Yes, we are using the Taxes tabs.  I guess what is happening is that when the invoice is printed, the default tax code (G) shows up on the line item, even with the amount calculated as $0.00.  Any way to stop that G showing up, because it is confusing for staff and customer?

The only way is to hit delete when you don't want the tax code.  You could also remove the customer's default tax codes when the customer is exempt or even all the time so you are required to put in the tax code when you need it only.

Thanks -- still would be nice if the no tax code came up automatically.  We sell many food items which are taxable except when over a certain weight or size, so cannot change customer defaults.  Maybe Sage can fix this in coming updates.