PayPal Here App - Discounts Not Calculating Taxes Properly

[DataMedics]

So here in RI there is tax on tangible goods, but not on services rendered.  Our transactions always include both the service amount and often sale of a tangible good or two.  We often need to put in a discount % for our repeat customers which is to be taken off of the labor amount only.  However, when I use the discount feature it also messes up the sales tax which is on the goods that aren't being discounted.

There needs to be a way to set how the discount is treated regarding sales tax.  Just like other line items that you can set what tax bracket to apply, it should have this as well.

That or at least add the option to add a negative amount line item.  It's horribly tedious to have to manually calculate the service total with discount applied before putting it into the app.  Come on guys, I've seen companies 1/100 the size of PayPal who've gotten this basic thing right.  Get your act together.

Update: As another thought, it'd be nice to be able to add a discount to just a specific item.  That'd probably be the best solution, because then it'd inherit the tax bracket of that specific item.

[DPCreations]

PayPal has an interesting approach to calculating sales tax and it has an impact on various results.

First, tax is calcuated on a per item basis.  This means the total tax can be off when all items are taxable; when all are taxable, the tax should be calculated on the total.  That's the way Square works.

Calculating total tax based on individual items is good when all items are not taxable, as in your case.

As for discounts, PayPal does not offer a per-item discount (I believe Square does).  This makes the tax calculation off when the order includes both taxable and non taxable.  I did some checking and it seems that PayPal calculates the negative tax on the discount assuming the discount is taxable based on your standard tax settings.

Your solution may be to just separate the sale into 2 sales.  Another option would be to just enter each item manually with a discount already priced in.

[DataMedics]

Having to run my customers credit card twice and pay extra fees is not an option. Obviously you're not a business owner or you'd understand just how unprofessional that would look to a customer.

[DPCreations]

Actually, I am a business owner; that's why I know how it works and that's why I test to verify.  That's also why I give buyers a printed receipt as it really looks professional and like a business should operate.

I've provided an explantion.  How you use it is up to you.

You could also evaluate Square for your business as it does offer individual item discounts.  I've taken time to do research so I can offer my buyers the most suitable payment method.  At times it's best to use FirstData.

[megan4zen]

I agree - this is really odd and I no longer want to use paypal becuase of this. I want to simply give a 20 dollar off discount but I would still like for my customer to pick up the sales tax that I paid. 

[DPCreations]

@megan4zen

What do you mean by "pickup the sales tax that I paid"?

For sales, you collect sales tax from the buyer based on the final price the buyer paid.  You remit that to the state.  Sales tax is based on the discounted price to the buyer; that's how sales tax calculation works.

[megan4zen]

ok - even if it is a coupon that I am giving them? the item itself is not a reduced price - I am just giving coupons as a perk. 

[DPCreations]

First, PayPal Here does not handle coupons; it handles discounts.

Second, how the taxable price is managed with your business depends on your state's requirements.  In FL, the taxable price would be the discounted price since the "coupon" is a cost to your business.

On the the other hand, if a coupon were a manufacturer's coupon where you, as a business got reimbursed for the coupon discount, the taxable price would be the full price before coupon.

You can't collect more sales tax than required by your state.  The tax collected must match with your accounting records for gross sales receipts.

[megan4zen]

The manufacturer coupon is what I am trying to handle. I understand the semantic difference between a discount and a coupon, but am unsure how or if there is a place for manufacturer coupons with the paypal small business invoicing. (I don't use the paypalhere phone app)

[DPCreations]

This is where you do it the old fashioned way:  you do the regular sale and give the coupon cash back to the buyer.  Your accounting records would then be correct for sales tax.  You would need to show the refund to the buyer and then submit th coupon to the clearinghouse for payment; you would then record that into your accounting program. 

PayPal Here does not manage those complex issues; it's just a payment processing service, not your accounting program.

I'm familier with PayPal Here but not small business invoicing.  In the end, though, a buyer would need to physically give you a manufacturer coupon so you have it to remit to the clearing house.