Tax is not applied to tax-exempt products

Charging sales tax on groceries in states like Texas or California — where food sold for home consumption is exempt — is a regulatory compliance failure that overcharges customers and exposes the store to audit liability. IRS Publication 334 and state-level tax codes define categories of exempt goods (groceries, prescription drugs, clothing in some states, medical devices). When the product schema has no is_tax_exempt flag, the tax calculation applies the full rate to every line item, making exemption enforcement impossible without a code change for each new product type added to the catalog. CWE-682 applies: the calculation is incorrect for exempt products.

Add a tax exemption flag to the product schema and reference it in lib/tax.ts:

-- Migration
ALTER TABLE products ADD COLUMN is_tax_exempt BOOLEAN NOT NULL DEFAULT FALSE;

// lib/tax.ts
function calculateTax(
  items: OrderItem[],
  address: Address
): number {
  const taxableSubtotal = items.reduce((sum, item) => {
    return sum + (item.is_tax_exempt ? 0 : item.price * item.quantity)
  }, 0)

  const rate = getTaxRate(address)
  return Math.round(taxableSubtotal * rate)
}

Seed exempt products with is_tax_exempt = true during data entry and verify the calculation result is lower than the full-cart total for a cart that contains exempt items. Do not rely on product name pattern-matching to determine exemption — use the schema field.