Invalid Item Tax Template for Item

We recently made the jump from V11 to V12 and there was apparently some differences in the item tax tables. We had a sales order which had some items which were non-taxable. In the older version (v11), you would set the item specific tax in the tax table but in V12 you need to use an item tax template. It was a bit different, but we figured out how to do this.

We tried to invoice the sales order which has some items which call up this new item tax template and it is complaining that it is invalid. We cannot figure out how to get beyond this and it is stopping us from being able to bill out this project. Has anyone seen this and how to do fix an item tax template which is invalid? The pop up says:

“Row 38: Invalid Item Tax Template for item Programming/Development

Help is greatly appreciated!