Why Does Turning Off Shipping Eliminate Charging Tax?

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Hello. We are currently running a fundraiser for our local school and they want to disable shipping so there can be a designated handout day. When removing the "requires shipping", it doesn't charge tax on the product anymore, even though the charge tax box is checked. Can someone help? We really need to make sure the taxes are charged appropriately so we don't get hammered later. I posted some screenshots showing the appropriate boxes are checked and the orders that came through without tax. I also want to say we made a new location for these specific products to go into so they don't interfere with our regular local pickup. 

Essentially, these are physical products and I want to disable shipping to make them local pickup only and charge tax. 



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