Did you find a solution yet? I am encountering this exact issue. I create a bill, mark the item as billable, a markup is generated, I check the tax box, and I include the customer information. I then create an invoice from the billable expense charge. The tax box is checked next to the item and next to the markup. The markup is automatically generated because the item is saved with a cost that is lower than the sale price. The invoice calculates tax only on the item, not the markup. When I click the see the math link, under the markup, it indicates a taxable amount of zero. It says "Uncategorized - standard rate applied." The item itself shows the full amount as being taxable and says "Standard rate." This caused me to collect insufficient taxes from clients and nearly caused me to remit an insufficient amount of taxes to the state. This is a serious problem.
