Tax products codes are used in situations where a customer needs to create tax exceptions for a grouping of products that not to be taxed at the normal general sales tax rate. For example a product may be treated as a food in Ohio and Florida based on your formulation and rules in those states as to what constitutes a food. The same product may not be considered a food to New Jersey based on their rules for content and formulation.
By default the system has product code PROD that is considered as taxable in all jurisdictions that have sales taxes assessed. The product code NOTAX will cause the system to not assess tax in any jurisdiction even though the item may have a taxable price field. The notax is used for reporting purposes because some jurisdictions want to know the total sales of non-taxable items - instead of just making the taxable amount zero you use the product code NOTAX for reporting.
If you believe your products will have specific taxation rules/rates based on the jurisdiction and the product, there is a monthly fee for this. We also need you to tell us what those exception rates are and when they are effective and for what jurisdictions and you must code the items. You are responsible for making these determinations and advising us of those exceptions and any changes to those rates and rules.
Shipping is taxed in some states in the U.S. - this is a state by state option. We have defaults in the system for taxing shipping in states but we make no guarantees or representations that the settings comply with the state rules. Our information comes from clients who do business in those states and we make the settings to comply with how our clients have interpreted those rules. Each client has the ability to specify whether shipping is taxable in a specific state and we make those changes based on those requests. You can use the defaults and then if you have customers who believe that shipping should or should be taxed in their state you can research these situations and advise us to change the settings in your system. As I'm sure you're becoming aware of, sales taxes in the U.S. are complicated and filing is even more complicated.
Regarding countries other than the U.S., you will need to tell us the taxation rates and rules for those countries and we will do our best accommodate those rates/rules.