How to remove tax on a Sale where tax is included in the item price?

[Michael-StarB]

How can you remove the TAX for transactions where the SET PRICE of the item includes the TAX?

WE are having an issue with reducing the price for guests that are tax exempt.    

The reason we use the PRICE includes tax is because we are rounding everything to the nearest 1/4 dollar.

any help would be appreciated. Think this may be a SQUARE PROGRAMIING ISSUE.

[Chad]

Hello @Michael-StarB! 

I think I have a good grasp on the issue you're describing. When you create an item and enter a price on Square Point of Sale, the system recognizes that as the price of the item. It can't distinguish that you've added the sales tax into the price. 

If I've missed the mark please let me know and we can work towards a solution together. 🙂

[Michael-StarB]

any resolution to this issue?

[Helen]

Hi again @Michael-StarB! Though you can remove tax at the time of sale, if the tax is included in the item price then the total price won't be altered when you remove the tax.

To make the checkout flow faster, you could create a duplicate item/items - without tax - to use for tax-exempt customers.

Or if you have tax-exempt customers infrequently you can view the tax included in the item price from the Items section of the app, and then apply a discount to the sale for that amount. To view the tax included in the item price from the Point of Sale app:

1. Tap the three horizontal lines > Tap Items.
2. Tap on a specific item and scroll down to Price and Inventory.
3. On a tablet you'll see the tax calculation in a separate line below the Price and Inventory section. On a phone you'll see the tax calculation in grey immediately after the price.

This is definitely a lengthy workaround so if you often have tax-exempt customers I can understand how this wouldn't be ideal! If we have any updates on this request we'll let you know here in the Community.

[mikesclub]

This reply was created from merging an existing thread: Tax is included in the price. How can I now deduct that tax for a tax exempt customer? 

My sale price ($25) has the sales tax (9.75%) included. Technically, this means that the true sale price is somewhere around $22.67.

When I ring up that transaction, the screen shows "tax included" (although it doesn't show the true price or the amount of tax, but that's ok).

I often have tax-exempt customers, and I need to be able to remove the tax for them. This is what I can't figure out how to do.

I know the formula for calculating the tax, when the tax is already included: $25 * 1+the tax rate. So I could do it on paper and then manually deduct the tax. But Square doesn't seem to have a function for this.

I can't be the only one who's faced this problem. Does anyone know how to deduct the tax after the price has already been included in the price?

[GlassJudy · Accepted solution]

It's really pretty simple to do what you want. Basically you'll set up a discount for 10.75% and apply that to the entire ticket, which is how discounts work in Square.

From your PC Dashboard, navigate > Items > Discounts. Here you'll create your discount: Click on Create a Discount, then give it a name (Tax-free or whatever you want), then enter 10.75 and make sure the % button is enabled.  When ringing up a tax-free customer, click on Discounts, then click on the tax-free discount and Square will do the rest.

[Michael-StarB]

I did this originally and ignored telling of this potential solution

which is NOT a solution

 cause 

people will give the discount so price is correct , but forget to take the tax off.  

It it needs to be a One button change not multiple.  

POOR  And LAZY fix that is not acceptable

Now I just don’t do tax exempt for anyone.  

THIS SHOULD ALREADY BE FIXED!

[Helen]

I'm sorry for the frustration @Michael-StarB and that this hasn't built yet. We are definitely still tracking this feature request and I agree a one button solution would be more efficient than using a workarond. In the meantime I've marked @GlassJudy's reply as a Best Answer to help sellers discover this workaround. Thank you for calling out that the tax still needs to be removed from the sale!

[mikesclub]

Thanks for your help. I guess I was overthinking the problem. I know the formula, and I know how to set up a discount, so I'm not sure why I couldn't see the solution right in front of me.

One correction though, and please tell me if I'm wrong:

The formula is "price * (1+tax rate)". 1+9.75 is 10.75. Not 10.975. Am I right?

Thanks again for the help. All good now.

[GlassJudy]

Yes, you are correct.  Sorry for the mistake.

[Helen]

Thanks @mikesclub! I've just updated @GlassDales' first post. Let me know if I need to make any additional changes.

[DivineCrystalHe]

That's not a simple fix. Taking the taxes off with a discount means your profit is reduced and you still need to pay the taxes when in fact, the exemption isn't applied but a reduction of profit is applied.

[Alex_]

Hi @DivineCrystalHe,

Thanks for posting. If you are looking to remove taxes from a sale, you can simply edit the transaction. by tapping on the current sale, and individually deleting the tax rule in play for that one transaction.

Hope this helps! Please let me know if you have any other questions by replying to this thread. 

[mikesclub]

NO @Alex_. That’s wrong! If the tax is included in the sale price ($10) and I just "turn off the tax", my customer still gets charged $10. 

My regular (non-tax-exempt) customers also pay $10, but their breakdown is roughly $9 for the purchase + $1 for tax. I have to remit that $1 to the state every month. 

But for my tax-exempt customer, even if I discount them an amount equivalent to the sales tax, I still have to remit tax on the remainder, even though I didn’t collect a penny of tax from the customer. 

[Alex_]

@mikesclub,

I'm sorry, I may not be understanding the exact process of how you are planning to report your taxes to your state. I recommend reaching out to tax professional in order to discuss your best options moving forward. 

[DivineCrystalHe]

Thank you! Yes we were able to find that feature. It's definitely the right way given that using discount would reduce our profit. 

[mikesclub]

That’s exactly right @DivineCrystalHe. That’s exactly what I’m trying to get the Square people to understand. And they don’t seem to want to see it. 

If my sale price (with tax included) is $10, and the amount of tax is $1 (for the sake of simplicity) then my actual sale price is $9. If I just discount the $1 and charge my customer $9, I still have to remit tax on the $9 even though my customer didn’t pay me any tax at all. So I’m unfairly shouldering the tax on what is supposed to be a tax exempt sale. 

This MUST be corrected by a Square programming solution. Tax exemption is pretty common. If you give me the ability to include sales tax in the final price, you should also give me the power to turn that into a tax-exempt sale and adjust the final price accordingly. 

Without using discount magic or other computational hocus pocus. Come on guys, this is accounting 101. 

[GlassJudy]

You're right in that I don't see your point.  If your price is $10, and you discount the $1 tax for a tax-exempt customer, you realize $9 from the sale.  However, I don't get how you are on the hook for that $1 in sales tax that you didn't collect, since your customer is tax-exempt.  For a non-exempt customer, you don't discount the $1, and you collect the sales tax which you then remit to the proper authority.

Part of my problem is this: if you include sales tax in the price of your items, why don't you have the sales tax either not defined, or not turned off completely, therefore in either case not collected?   Another part of my problem is how do you know how much tax you've collected if you're not having Square calculate it on each sale?  If you don't sell any tax-exempt items, then it's probably a straight percentage, but then how do you account for tax-exempt customers?  If you collect that percentage on all (taxable and tax-exempt customers) sales, then you really are on the hook for tax money that you didn't collect.

I'm just trying to completely understand your problem so I may be able to help you out.  I admit that I don't understand why a business would include sales tax in their sale price since it really complicates the issue of properly accounting for non-taxable customers.  To me, it's much easier to have Square calculate your sale taxes, and then I can turn off tax collection for exempt customers or items.  I do have an issue with Square on this, as I and several other sellers have been asking for the ability to designate individual customers as either taxable or tax-exempt, as now our checkers have to know if a given customer is non-taxable and that's simply asking too much.  Further complicating the task is that we give many of our tax-exempt customers a discount based on them being tax-exempt (for instance we give our local school districts a discount, and they are tax exempt too.)

[DivineCrystalHe]

There is a button to turn the taxes on and off. I saw that in this thread somewhere and it worked. We need to have a "counter" system in place though to report it on our books though for audit. I'll have to create a form. We don't have that situation often. When I worked retail, we used to simply write it in our tape for the bookkeeper. 

[Joe]

Hi there, @DivineCrystalHe - thanks for trying that out! I'm glad it worked for you. You are correct here - if you select to turn Taxes off, this won't have a specific designation to reflect on your Reports. You will, in lieu, need to make some sort of record keeping mark of your books.

I am going to pass your feedback along to our Product Teams, however! This is solid feedback.

[Mortys]

When I worked in retail there was a "tax shift" button.

If an item was non-taxable but was in a category that is automatically taxed, one would ring the price, then enter the "tax shift" (tax exemption for that item), then category.

A tax shift key would be ideal for me, but I haven't figured out how to do it yet.

All the discounting stuff doesn't play well. Your customer pays the correct amount but the system will back-tax the item leaving you a sales tax burden. You can adjust the math for your dollars and cents, but you need to include the sales tax expense you'll pay later. That's too messy for me.

Scott O'Connor

Parsons Farm