Sorry for the frustration @pvoc3000 — I hope you're not pulling your hair out! 

You're right, when using dining options you can create a tax rule that that removes tax from a single item, and not the entire order. This Support Center article has some tips for using tax rules.

It's also really important to use the most up-to-date version of the Point of Sale app to make sure rules you've created on the Dashboard sync with the app. The most recent version is 4.67 (for iOS and Android).

If you've updated the app and the tax still isn't applying correctly, please reach out to our Support team directly too so that someone can review your settings and escalate this to our engineers if needed.