Product categories

Product categories are labels that are assigned to products or to collections of products. They indicate the tax obligations and exemptions that customers have when they purchase those particular products. Product categories are selected from the Shopify Product Taxonomy, which is a predefined and standardized list.

Product categories are also useful for managing your products, and can be used for the following:

Automatic product category suggestions

When you create a product, or if you have existing products that use product types or other information that helps to identify the product, then a suggestion for a product category is generated for the product. The suggested category isn't applied until you accept it.

This category is only a suggestion, and shouldn't be considered tax advice. It's important that you verify the accuracy of the product category before you accept it, and to speak to a tax professional if necessary.

Choosing and managing product categories

To review and manage your product categories, from your Shopify admin go to Settings > Taxes and duties > United States > Tax rates and exemptions. In the Categorize products for tax purposes section, click Manage categories.

On the Product categories page, a notification is displayed if you have products that don't have product categories applied to them, or if you have suggestions for product categories that need to be reviewed. There are two tabs that display products in need of review. The Pending review tab displays products that have product categories suggested for them. Product categories that are suggested in this tab don't apply unless you accept them. The Pending selection tab displays products that don't have suggestions, and must be manually selected.

There are multiple ways that you can apply product categories to your products.

Select or approve a product category individually

  1. On the Product categories page, find the product to select or approve.
  2. Do one of the following:
    • If a suggested product category is provided, then approve the suggestion:
      1. Click the check mark in the Product category box.
      2. Click Save.
    • Search for and select a product category:
      1. Click the x in the Product category box.
      2. In the Product category box, start typing a description of the product.
      3. Click the product category when the correct suggestion is offered.
      4. Click Save.

Select or approve product categories in bulk

  1. On the Product categories page, click the checkbox next to all products that you want to select or approve.
  2. Do one of the following:
    • If suggestions are provided, then approve the suggested product category for all selected products:
      1. Beneath the product list, click Accept and save.
      2. Click Accept and save all.
    • If suggestions are provided, then search for and select a product category for selected products:
      1. Beneath the product list, click Edit products.
      2. In the Product category box, start typing a description of the product.
      3. Click the product category when the correct suggestion is offered.
      4. Click Save.
    • If suggestions aren't provided, then search for and select a product category for all selected products:
      1. Beneath the product list, click Choose category.
      2. In the Choose category box, start typing a description of the product.
      3. Click the product category when the correct suggestion is offered.
      4. Click Accept and save all.

Select a product category by using a CSV file

You can import product categories using a CSV product import. To verify that your product category values matches Shopify's predefined list, refer to the Shopify Product Taxonomy.

You can download and view a sample product CSV file to use as a template.

Tax calculation by using product categories

After you categorize your products, the categories are used to automatically determine your tax obligations when selling into a particular state. Using product categories increases the accuracy of tax calculations, and reduces the need for tax overrides.

For example, suppose that you sell t-shirts. In New York, clothing and footwear under $110 USD are exempt from New York City and New York State sales tax. If the correct product categories are set for your products, then these taxes are not charged when you sell your products to customers in New York. If the rules that govern these products change in the future, then the way tax is calculated for your products is automatically updated, with no action required on your part.

You're not required to use product categories. However, if you choose not to apply product categories to your products, then you need to use tax overrides and manually update them. If you set a product category for a product that has an override in place, then the override takes precedence over product category tax calculations. Consider removing any product tax overrides that conflict with your product categories. However, if you're aware of tax rules that aren't calculated by product categories, then keep your product tax overrides.

Limitations

There are some situations in which product categories can't be used to calculate taxes:

  • Industry-specific or product-specific taxes that result in a separate tax line item, such as e-waste fees.
  • Taxes that are based on volume, weight, ingredients, or size, such as excise taxes.
  • Variants of a single product can't have different product categories.
  • Bundled goods that are created as a single product have a single product category.
  • Product categories do not sync between Shopify and marketplaces, such as Meta or Google.
  • Product categories aren't applied to orders that don't qualify for Shopify Tax.

Testing tax calculated by using product categories

Because there isn't a way to preview specific tax rates, you might want to create test orders for products and locations where you're familiar with specific tax rules. If the resulting tax calculation isn't what you expect, then review the product code to ensure that it's accurate. For help setting your product categories, contact Shopify Support. If you're not sure that you've set the correct product categories, then contact a tax professional.

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