Does setting up Customer Specific Pricing for a tax exempt customer involve variants?

Yes, Customer Specific Pricing does create additional variants for tax-exempt customers. It's important to note that if you don’t discount the product the customer will still be exempt from taxes at checkout.

However, the combined Customer Specific Pricing and Quantity Breaks app would change the variants as they are viewed as one app instead of two. That's partly why a customization is necessary to use them both together.