Product Types are a way of grouping products together for special tax or accounting treatment in your accounting software (Xero or QuickBooks).
If you prefer to post sales by product type rather than all products in aggregate, then you can configure product types below based on one or more product SKUs.
An example where this might be required would be where several SKUs that you sell need to have a different tax rate applied in your accounting software. By grouping those SKUs into a product type, you can select a different tax rate when posting the invoice.
A guide to setting up product type grouping can be found HERE
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