Product or service? Do you know the difference? Understand everything here!

See this article:

• What is the difference between products and services?
• Is there a difference in taxation?
• Product examples
• Service examples
• What are the most common products and services on the market?

What is the difference between products and services?

The main difference between products and services lies in tangibility: products are physical goods that can be touched and stored, while services are intangible and involve an activity performed to meet a customer's needs. In short, products are something you can hold, while services are actions someone else performs for you.

Beyond tangibility and the ability to inspect before purchase, there are a number of other fundamental differences between products and services that directly influence how we negotiate, consume, and manage them. See details on some of these in the following topics!

Storage and Durability

Products have the advantage of being able to be stored for long periods without deterioration, unlike many services that are temporary and cannot be preserved for future use. For example, while a meal at a restaurant cannot be saved for later consumption, packaged food can be stored for an extended period.

Physical Characteristics and Assessment

Products can be visually and physically evaluated before purchase, allowing consumers to verify their quality and suitability for their needs. On the other hand, services often cannot be evaluated in advance, which can create uncertainty about quality and delivery.

Management and Availability

Products require logistics management that encompasses aspects such as storage, transportation, and inventory control. Meanwhile, services aren't concerned with physical inventory, but rather with human resource management, scheduling, and staff availability.

Ownership and Enforcement

Products involve the transfer of ownership from seller to buyer, while services focus on the execution of a specific task. For example, when purchasing a car, the customer becomes the owner of the vehicle, but when hiring a transportation service, they pay for the service provided without becoming the owner of the vehicle.

Product examples

By exploring concrete examples of renowned companies that deal exclusively with products, we can better understand the diversity and breadth of this sector.

These companies are known for their ability to create and market an impressive array of products that meet the needs and desires of consumers worldwide. Below, I've introduced three widely recognized companies, along with some of the iconic products they offer:

Service examples

Companies that excel in service delivery offer a diverse range of solutions to meet their clients' needs. Let's examine some notable companies and the services they offer:

Learn here how to how to make a service provision proposal.

What are the most common products and services on the market?

In Brazil's market landscape, both the services and product sectors play essential roles in the country's economy. According to data from the Brazilian Institute of Geography and Statistics (IBGE), the services sector represents a significant portion of Brazil's Gross Domestic Product (GDP), contributing approximately 75% of the country's economic activity in 2020. This sector encompasses a wide range of activities, from financial and healthcare services to transportation and tourism, reflecting the diversity and complexity of the Brazilian economy. Source: IBGE

The product sector is also fundamental to Brazil's economy, encompassing industries that manufacture a wide range of consumer and industrial goods. According to the IBGE (Brazilian Institute of Geography and Statistics), Brazilian industrial production experienced significant growth in 2021, driven by the economic recovery and domestic and foreign demand for manufactured goods. These data highlight the importance of both services and products in Brazil's economic dynamics, highlighting opportunities for entrepreneurs and investors in both sectors.

Below, I provide an overview of the most common products and services currently in high demand:

What about tax differences between products and services?

When considering tax implications, it is crucial to highlight the significant differences between businesses that sell services and those that sell products.

In Brazil, taxes can vary depending on the nature of the business, directly impacting the profitability and financial viability of the enterprise. Businesses that sell products are generally subject to taxes such as the Tax on Circulation of Goods and Services (ICMS), the Tax on Industrialized Products (IPI), the Social Integration Program (PIS), and the Contribution for Social Security Financing (COFINS).

On the other hand, businesses that provide services may be subject to taxes such as the Service Tax (ISS) and Income Tax (IR), in addition to specific social security contributions for self-employed professionals.

It is important to carefully consider these tax differences when planning a new venture, as they can have a significant impact on the cost structure and profitability of the business.

It is recommended to seek guidance from professionals specializing in accounting and tax planning to make informed decisions and maximize the tax benefits available in each business category. For more information on corporate taxation in Brazil, see website of the Brazilian Federal Revenue Service.

How do I classify my business between products or services?

Determining whether your business is a producer of goods or a provider of services is crucial to defining your tax regime and legal responsibilities.

Carefully evaluate the predominant nature of your business offering: whether it's physical products or intangible services. It's important to consider that, in some situations, your business may involve both.

To avoid legal issues and ensure your company is properly regulated, it's recommended to seek guidance from an accountant or tax specialist, who can offer insights into best practices suited to your type of business.

Understanding the distinction between products and services is essential to achieving business success and effective financial management.

Assigning the appropriate classification to your business has significant legal and tax implications, which can directly impact your profitability. Therefore, take the time to thoroughly analyze your business model and seek expert advice if necessary.

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