Ok figured this out and I hope it helps some one else ...
I have one customer tax class ... Retail
I have one product tax class ... Taxable Goods
For my example I have 3 tax rates ... Canada (5%), US (0%) and Mexico (0%)
But no matter what I did I always got charged 5% tax. The reason for this is because the default system configuration always calculates tax based on the shipping origin ... that means your store address.
I then went into the admin ...
System > Configuraion > Sales > Tax Calculation >>>
... and selected “Shipping Address” for “Tax Based On”
... Now everything works dandy. This should kind of be documented a little better as this took me quite a while to figure out.