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Product Tax Category

Overview

2Checkout added a new product attribute in the Merchant Control Panel, the Product Tax Category, to increase the accuracy of the tax determination and reporting process.

Availability

Available by default for all 2Checkout merchants. Read here how to apply the Product Tax category from your Merchant Control Panel.

Product Tax Category rules

Product Tax Category Category Description Business Model Availability
Credit reports Credit scores and other credit characteristics of individual consumers (the US only).

Merchant of Record

Electronically-delivered software Software that is primarily downloaded from the Internet and operates from customers' computers.

Merchant of Record/Payment Service Provider

Digital products Examples are digital books and newsletters, digital music or other audio, digital audio-visual works, pictures, online games, ringtones, etc.

Merchant of Record/Payment Service Provider

Software as a Service (SaaS) Online software-based services where primary functions are performed on remote servers. Software primarily resides in cloud or remote servers, not on the customer computer. Examples are Virtual Private Networks (VPN), data storage or backup online, website optimization, etc.

Merchant of Record/Payment Service Provider

Technical support/Helpdesk services Online or telephone support services for software or hardware.

Merchant of Record/Payment Service Provider

Specialized education services Online training or learning modules. Excludes in-person training.

Merchant of Record

Seminars-Online

Online training or learning modules. Excludes in-person training.

Merchant of Record

Physical Goods

Generic Taxable Product

Payment Service Provider

Supply of Services

 

Payment Service Provider

Taxes differ according to the various product tax categories. Tax deduction takes into account the product tax category added at product level for more accurate tax determination (for example, there are certain states  in USA where SaaS products are charged an 8% sales tax, others where the sales tax is 0%).

Default Tax category assignment

  • For the 2Monetize accounts: Products that don't have a tax category assigned will be automatically considered as "Electronically-delivered software".
  • For 2Sell & 2Subscribe accounts: Products that don't have a tax category assigned will be automatically considered as “Physical Goods”.

For all new products, the selection of the Product Tax category is mandatory.

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