If you change your product classification to Digital – Customization of Software, it may affect your tax liability.
Sales tax rates in the U.S. depend primarily on two key factors:
Shipping Address
Product Category
When you classify a product, our tool automatically checks the relevant tax rules based on the shipping address and category you selected. For instance:
If you categorize an item as Clothing, the tool checks the applicable sales tax rules across different states. For example, clothing isn't taxed in New Jersey but is taxable in California.
Similarly, when classifying a product as Digital – Customization of Software, the system identifies the tax rate based on local laws. Some states might impose higher taxes on digital software customizations, while others might have lower rates or none at all.
Always ensure your products are correctly classified to apply accurate tax rates and remain compliant with local tax laws.