# Selecting the right Product Tax Code for Managed Payments

_Learn how to select and manage PTCs for accurate tax classification in Managed Payments._
## What is a Product Tax Code (PTC)?
A [Product Tax Code (PTC)](https://docs.stripe.com/tax/tax-codes) is a classification system used to identify and categorize products and services for tax purposes. Each PTC corresponds to a specific type of product or service and is one of the components used to determine the applicable tax rate and rules.
## How to add or update a PTC
You can add a PTC during [product creation](https://docs.stripe.com/payments/managed-payments/set-up#create-a-new-product-and-price) directly from your Dashboard under the [Product Catalog section](https://docs.stripe.com/payments/managed-payments/set-up). You can also update existing products' PTCs from the same section in your Dashboard.
## Selecting the right PTC for your product
Multiple PTCs are [eligible](https://docs.stripe.com/payments/managed-payments/how-it-works#eligible-product-tax-codes) for Managed Payments. Select the most appropriate tax code for your products from Managed Payments’s [approved PTC list](https://docs.stripe.com/payments/managed-payments/how-it-works#eligible-product-tax-codes). This article is neither legal advice nor tax advice. We recommend speaking to your tax advisor with any questions or concerns regarding PTC selection.
* **What is Software as a Service (SaaS)?** Software as a Service (SaaS) refers to cloud-based software accessed over the internet.  This software is hosted by the seller and a user accesses it from an internet browser or mobile app. SaaS is not customized for individual buyers and is not installed onto a computer or server, but may be accessed via a mobile app downloaded by the buyer.
* **What does electronic download mean?** Frequently, SaaS products will offer a companion mobile app or have extensions and plugins designed to be used within a user’s browser to extend the functionality of the product.  If your product can be installed on a user's computer or if it can be hosted by an enterprise user on their own servers or on premises, then your product may be classified as a downloaded software tax code instead of any of the above Software as a Service categories.
* **What is Downloaded Software?** Downloaded software is prewritten or "canned" software that the buyer downloads and installs to their computer or server.
* **What does personal and business use mean?** In this case, think about who your users are and how they might use your product.  It's possible for products to be offered exclusively for business use, exclusively for personal use, or maybe your product is flexible enough to serve any type of user. You may choose a business use PTC if your product is exclusively for business use.  If your product is generally for business use, but a serious hobbyist might use it for their personal purposes, then you may choose a personal use PTC.
* **If I’m selling a Subscription, should I use a SaaS PTC?** No, not necessarily.  The product tax classification for your subscription service depends on the product tax classification of the item you’re selling.
  * If your product is downloaded to a computer or device, then your PTC may be downloaded software.
  * If your product is hosted in the cloud and accessed from an internet browser, then your PTC may be software as a service.
  * If your product is hosted in the cloud and accessed via a mobile app, plugin, or extension, then your PTC may be software as a service - electronic download.
  * If your product is a video game, training service, audio, or audio/visual product, then you should [review those PTC definitions](https://docs.stripe.com/payments/managed-payments/how-it-works#eligible-product-tax-codes) for the best fit for your product.
## Importance of selecting a PTC
Choosing the correct PTC is essential for accurately calculating taxes on products and services. The PTC helps determine the tax treatment, whether a product is taxable or exempt. It also influences the applicable tax rate, which can vary between standard, reduced, alternate, or zero rates. Tax rules and classifications differ significantly by jurisdiction, particularly in the United States, where nuances in tax law can affect how products are classified and taxed. Therefore, maintaining accurate product tax classifications is critical not only for compliance but also for mitigating potential tax liabilities.