How to exempt state tax?

Hi SAP gurus, sorry I created a new thread for this issue. I couldn't find an OSS note for this problem.
Right now we use the tax exempt indicator in IT0210 "R". Our employees' supplemental payment are exempt from AZ state tax. This setting was working for us last year but now it doesn't work. We have to set up the alternate tax fornula to exempt the state tax for supplement payment.
Does anyone have more details about this issue? Why the tax exempt indicator "R" won't work any more?
Thank you in advance.

Thank you Amit. We have the Start and To fields filled for IT0210. The system warns Exemption checkbox selected, end date should be changed to 12/31/2008. I did as it says but it still doesn't work.
OSS note 672148 is talking about the combination of exemption amount, allowance and the exempt indicator. No matter if I use the allowance and exemption amount or not, the AZ state tax is took as 10% of Fed tax.
The only way I found now is to use the Alternative formula as 0% which we don't have to use before. My guess is BSI is now using a fixed percentage of AZ state tax to Fed tax so the tax exempt indicator is not valid for AZ. But the alternative formula is optional for AZ.
That's my understanding of this process. Let me know if you have any details of this issue.
Thanks,
Johnson

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