Sales Tax Not Being Calculated Properly

[HeatherM]

Square in not calculating sales tax properly on sales.

For example:

Item Price is: $2.75

6% Sales tax = 0.165

Square uses 0.16 which is incorrect.

Every tax table in the US rounds that up to 0.17 which would be correct according to my state's tax tables.

[HeatherM]

[HeatherM]

I know this sounds like I'm nitpicking, but in the larger scale of things...

If I sell 1000 items at $2.75 each, when sales tax reports are filed my gross sales would be $2750.00. The tax due would be $165, but I would have only collected $160. That is $5 short of what I should have collected.

$5 is $5. 😉

[JJ21]

We have the same problem and it is driving our bookkeeper crazy......looking for replies that will help us out. Can't seem to find the answer manually or by going through the numbers over and over........still up in the air about it. 

[HeatherM]

Unfortunately there's nothing we can do on our end. This needs to be fixed by Square.

The key is the 3rd and 4th decimal place when tax is calculated.

The 4th decimal place is used to round the 3rd decimal place up.

Example:

0.4404 rounds the 3rd decimal to 0

0.4405 rounds the 3rd decimal to 1 (0.441)

The 3rd decimal place is used to round the 2nd decimal up if it is anything other than 0.

Example:

0.440 remains as 0.44

0.441 should be rounded up to 0.45

Or at least that places the tax to be collected a heck of a lot closer than coming up short.

[VRJRDU]

I'm having the same problem.  I have $0.50 items with a 7.25% tax rate.  It should come up to $0.54 (rounded up from 0.53625) but it calculates as $0.53.  I know it's only a penny, but we've been selling enough that it's now noticeable in my monthly sales tax reporting to the state tax dept.  Has anyone from Square responded to you?

[HeatherM]

Unfortunately no they haven't. When we file our sales tax reports the amount collected is short by a small amount as projected in my original posts.

It's not a problem from our state's tax department, so long as they get what is due to them. Unfortunately, it comes out of my pocket and affects profit margins ever so slightly.

[VRJRDU]

Thanks for responding.  Yes, we're in same boat. We just pay the gap but Square really needs to fix this. We can't be the only ones experiencing this.  

[HeatherM]

I agree it needs to be fixed. But I'll hazard a guess that a lot of people just pass the problem off as a part of normal operation not even realizing there's a problem.

Coming from another POS system we used for eons, I noticed it right away with my $2.75 example. For 15 years that other POS system correctly charged 0.17 tax for a total of $2.92. The first time I rang up a sale of that item in Square Register, it came up at 0.16 tax for a total of $2.91. So it was visible and obvious right away.

[VRJRDU]

I figured it out because we've never been short when reporting to the state tax department and the $0.50 items were new; essentially the only thing different.

I looked at a few other items.  Square is overshooting by a penny on other items; they're just not my most common items.  It does make me wonder whether or not they're calculating our fees properly or if we're all just assuming that they know how to round.  I'm going to double-check my transaction fees over the next few days to see if that's an issue too.

[JustinC]

Hey there @VRJRDU - sorry for the confusion around how transaction and item tax are calculated. Hopeful this thread can provide some clarity. 

[HeatherM]

I mentioned this to my husband who is a programmer and he said that it's most likely the system uses Apple programming and that they are probably using "toNearestOrEven" when they should probably be using "awayFromZero" for tax calculations. But he can't be 100% certain of that since he's never worked with Apple programming.

[VRJRDU]

While that thread is helpful, it's also a bit confusing.  My state tax department does not use bankers' rounding, so I'm curious as to why Square chose that method.  My guess is that no tax departments use that method since they'd have to have details for every transaction in order to reconcile for the seller.  This rounding method is probably beneficial for Square, and would take some class action to have them fix it.

[shornera]

Just an FYI, Quickbooks does not use bankers rounding either. So, the integration of Square with QB's is not very clean.