A tax zone is a group of regions that share the same tax rates. When an order comes in, its address is matched to one zone, and that zone's rates are what the customer pays. Zones live on the Tax tab of each market, and a zone can only cover countries that belong to its market.
Three ways to draw a zone
A zone can name specific regions of a country — say, a few states or provinces — and it then covers exactly those regions. A zone can name a whole country, and it covers everything in that country that a more specific zone hasn't taken. And a market can have one default zone, which covers every address the other zones don't. The most specific zone always wins: an order from a state with its own zone uses that zone, not the country's.
Addresses outside every zone
A default zone is never created for you. If a market has no default zone, an order from an address that no zone covers is sold without tax — and the order shows that no tax was applied because no zone matched. If you want every address covered, create a default zone.
No overlaps
Two zones can't claim the same region. When you build a zone, regions that already belong to another zone are shown as taken; carving specific regions out of a country is how you split it — the country zone keeps the rest.
Business tax exemption
Each zone can exempt approved business buyers. The exemption is set per zone because it is the jurisdiction's rule — whether a tax authority honors a business tax ID depends on where the order is taxed, not on who you sell to. Entering an ID at checkout does not prove that it is valid and never removes tax by itself. The exemption applies only after the buyer has been verified as tax exempt. You choose what the exemption does: remove the tax entirely, or charge it and mark the order for a business invoice.