How can I manage tax exempt purchases or set up a customer as tax exempt?

ERM_TS · ‎06-23-2016

We have tax (7%) set up as default for every non-food item in our store. Recently, we had someone bring in a Tax Exempt Certificate. Is there a simple way to turn the tax off for an entire order? The poor cashier had to disable the tax for each item one at a time.

We currently have the settings button (the three lines in the bottom left corner) locked down because many of our cashiers are volunteers and we would prefer to not allow access to any of these settings. Only the manager can bypass this security measure, but the manager is not always close by.

Chubbys · ‎08-04-2022

The title of this thread has been edited by a Square Moderator from the original: "Waiving the Texas state tax"

So I had my first instance of tax-exempt diners since moving to Texas. A group from Texas A&M got done eating and presented a tax-exempt credit card from the university and a tax-exempt certificate. I have never had to do this. So, I'm all ears as to properly do this.

Candlestore · ‎08-04-2022

@Chubbys ;

I am not sure of all different laws for your state, but in Pa for me to be tax exempt, I need to sell what I buy or it has to be used for the business. Now meals, I can write off my taxes as a business expense but I am not sure if they are tax exempt. Check with other restaurant owners in your area about this.

Now as for removing the tax, you can select it on the screen and swipe it to the left or right and a RED button should pop up to turn off Tax or Remove it. This just removes sales tax for this transaction.

Now also I keep record of my Tax Exempt sales with paperwork from them saying why they are Tax exempt and have them fill out another form for PA. This is what the PA form looks like:

https://www.revenue.pa.gov/FormsandPublications/FormsforBusinesses/SUT/Documents/rev-1220.pdf

I keep records of all this on file in QuickBooks and in Square I create the customer and make a note they are Tax exempt. I also have a group called Tax Exempt that I keep all these customers in, in Square.

_Violet · ‎08-04-2022

Hi @Chubbys - Thanks for reaching out to us here on the Square Seller Community👋

I went ahead and merged your post to an existing thread where other Square Sellers have discussed tax-exempt transactions. We merge duplicate conversations together to keep like comments in one place, and to make it easier for others to find the thread in the future.

Please see the reply from one of our Community Moderators, @Kpay, which has been marked as the Best Answer to this question ✅

I hope this information is helpful but please do let me know if you have any additional questions.

And thanks to @Candlestore for your assistance here! 🙏

petalzbyannie · ‎10-11-2022

We need the tax-exempt feature also for various organizations

ehflower · ‎10-12-2022

Hi i have submitted this (tax exemption creation for clients) as a request also to improve the reporting on this. they stated it was not currently planned. Please look into this thank you.

Michael80 · ‎02-15-2023

In addition to adding "Tax Exempt" fields to customers that automatically remove sales taxes for sales to that customer, there MUST be a way for Square to track and REPORT all tax-exempt sales. It's not good enough to just report how much taxes were collected: we need to know the dollar amounts of each category of tax-exempt sales so we can report these numbers on our state & city sales tax filings.

When we file our taxes, we must report the GROSS sales and we must report any tax-exempt sales as a DEDUCTION. If during a sale, we just delete the tax on that sale, that doesn't record the amounts of tax-free sales in Square's reporting. Furthermore, it doesn't tell us why the tax was deleted. For example, these are the types of tax-exempt sales listed by the Colorado Dept of Revenue as separate line item deductions when we file our sales taxes each month:

Wholesale sales, including wholesale sales of ingredients and component parts
Sales made to nonresidents or sourced to locations outside of Colorado
Sales to exempt entities and organizations
Other exempt sales (see instructions and identify type(s) of exemption(s) claimed below)

I don't expect Square to hard-code each of these into its software because each state is different and a state can change its requirements at any time. But there SHOULD be a way for us to add each of these as a tax-exempt reason and then when the sales tax is removed from a transaction, the software prompts us to give the reason for the tax exemption (which is then tracked and reported in Square's sales tax reporting).

Another big problem with the current software is that, AFAIK, there's no protection (passcode or admin restriction) for deleting the sales tax on a transaction. Why? I don't want a cashier to be able to indiscriminately delete sales tax without admin or manager approval. Of course, such approval should be automatic IF Square could automatically remove sales tax from customers with pre-approved tax-exempt status (e..g, wholesale business or non-profit entity).

It's shocking that this hasn't been corrected by Square since this deficiency was identified 6 years ago. Also, why has this thread been marked as "Solved" when it clearly has NOT been? 😠

MayaP · ‎02-16-2023

Hello @Michael80 , thanks for reaching out and voicing your feedback on how we can improve our tax reporting. I want to confirm you want a place to add the tax-exempt reasons, and would you add the reason at checkout? You then want that reason to show on the Sales Tax Report, is that correct?

autoparts · ‎02-16-2023

Not the original poster, but what Sellers need is the ability to mark certain customer profiles as "sales tax exempt" and the "justification" or "reason" why. The previous poster listed the Colorado reasons, but in Virginia the reasons are slightly different.

Something similar to the item-discount drop-down would be very useful since it lets Sellers control the text but the effect is that all purchases under that customer profile has sales tax turned off as default.

Example: John's Store is a Seller; one of his customer is sales-tax exempt due to being a reseller. A customer profile is created for that customer with "Tax Exempt" added with the reason of "Reseller" from a drop-down. A different customer is tax exempt due to being a farm/agriculture, so a customer profile is created with the tax-exempt reason of "Farmer" in John's Store Square Customer profile.

Then, under the Tax Report, there should be an entry for "Tax Exempt Sales" that matches each of these Seller-defined reasonings/drop downs.

I.e. John's Store had $10,000 in tax exempt sales. $6,000 for "Reseller" and $4,000 for "Farm/Agriculture".

Hope this helps illustrate what the "ask" is here - at least from my point of view.

Rulon-Miller · ‎02-16-2023

Yes, this is what we need too.

The base issue here is that we need tax-exempt /customers/ not items or individual receipts. Creating a tax exempt item does not help us. We sell that same item to private buyers and governmental purchasers. We need the customer themselves to be tax-exempt, and then reporting that stems from that would be even better.

Candlestore · ‎02-16-2023

@Michael80 ;

If you go into your Team Permission setting you can toggle off the ability to adjust Taxes during a sale.

If you have this toggled off than any team member with this Permission set could not adjust Taxes without a manager or owners code.

Now what I do for Wholesale accounts is I write up an Invoice in a Spreadsheet, with a total and then on my Square Stand I scan a Barcode that is called Wholesale, which has no Sales Tax associated with it. This way when I run my Transactions Report for a Month as a CSV file I can sort Items and all my Wholesale Sales are together. Then I can add this all up if needed. I also have the Invoice with Invoice Number for what Items I sold to deduct them from inventory, which I usually just make the items for each Wholesale Customer, and only put into inventory the items that were not sold in that wholesale order. meaning I have and order for 30 - 28oz French Vanilla.... I make about 40 - 28oz French Vanilla at a time. Wholesale customer gets their 30, and I only add 10 to receiving inventory.

This has me having the $ amount of the Wholesale order, Who I sold it to, all the items I sold and I also have in my Accounting software their paperwork showing why they were tax exempt.

I saw above that someone needed to remove Sales Tax from each item in the Checkout, which I have found you can just Slide the Tax off and it removes it from the total. I document which Receipt was for which Invoice, and add it to my Wholesalers Folder I save on my network drive. Since Square is mainly a Point of Sale device to accept Credit Cards, I set my self up to track these items for Tax purposes incase I am ever questioned. Square is more for taking Credit cards and not a Tax or Accounting software program which is where some people get confused. Would it be Ideal to have a Point of Sale and Financial Accounting Package in one, YES. Are you going to get all that at the Price Point Square is at???? QuickBooks is an account program and they do offer a POS and way to accept credit cards, but their fees on software etc is more.