To issue a sales tax refund, you first have to set it up in your inventory.

• The Item Number must be TAX REFUND
• The Memo is a Zero
• The GL# must be your Sales Tax Liability General Ledger Account Number
• The item must be marked as No Tax

Those four fields are the only fields used and must be filled in correctly as indicated. 

Next, you have to create a sales order for the customer who you'd like to refund the sales tax to, putting the tax refund inventory item on that sales order.

When you select that item from your inventory, it will prompt you "tax refund calculation" Here, you'll enter in the sales tax amount that needs refunded. Then you print/bill/close and choose the form of payment or charge to their account. 

AFTER that is done, you can change the customers tax area to exempt on their customer file, by doing an F4 edit and using the tax area drop down.