Product Tax Category
Last updated: 17-Oct-2025
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 |
| Digital Products - Educational/Training Content | Items of audio or visual work that is delivered electronically and used for educational or training purposes. This includes but not limited to educational videos, music, photos, pre-recorded courses, exams. | 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.
