I was working with one of WordPress project. I used Custom Post Type UI plugin for creating Custom Post Type. I want to create taxonomy as well for new custom post. Taxonomy can be either categories or tags. By default, taxonomy will treat as tags and not categories.
Categories are the one to define and choose from Pre-defined list while creating post while tags are the one where it just lets you type whatever you want in. If you are creating front page for users to add custom post and it has taxonomy, you need to give them choice to choose from.
To achieve this, you just need to set below option.
When you create new taxonomy, Expand advanced options when creating a taxonomy and set Hierarchical to true.