Unable to have Party exemption applied to lower level taxes

In our new instance, my customer exemption did not work like it did in the old instance. It applied to STATE tax only but not other taxes.  I checked Apply to lower level box on the tax profile. But County, city, and PC still has taxes. I went to the old instance again, created a new customer with exemption. Created an invoice, all level of taxes were exempted. I have checked the Tax, tax status, jurisdictions, and rates are all allow exemptions, and inherits from STATE.  I wonder where else should I look. The DBA claims the two instance patch