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#1 06-20-2017 17:19:59

htw_simon
Member
From: UK
Registered: 11-20-2007
Posts: 83
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Charging Tax on Surcharges

How do I set it to charge tax, in our case VAT, on surcharges set using 'custom surcharge methods'?

We have a 2% surcharge for PayPal payments, however VAT is not added as with all other items.

Thanks!

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#2 06-21-2017 08:22:28

webmaster
Administrator
From: York, PA
Registered: 04-20-2001
Posts: 19701
Website

Re: Charging Tax on Surcharges

The order of operations in checkout is:

# Initial totals and tax calc

+ Subtotal
+ Shipping
- Custom Sale
- Discount Codes
+ Taxes (based on Subtotal + Shipping - Custom Sale - Discounts)

# Deductions which are not not payment related

- Rebate
- Negative Order Adjustment
- Loyalty Points

# Additions, after the lowest total is available

+ Custom Surcharge
+ Positive Order Adjustment

# Payments, after the final payable total is available

- Gift Certificates
- Credits
- Customer Payments

Based on the above, you can see the surcharge comes into play well after taxes and is not a taxable component.  You would be best off combining your surcharge and shipping logic into a Custom Shipping Script and calculating all the charges as shipping, perhaps with a note in the delivery method about the surcharge.  Or, you could simply calculate your surcharge at +20%, but would lose appropriate reporting to the customer in doing this.


Nick Hendler

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#3 01-22-2020 19:21:56

sppars
Member
Registered: 01-25-2006
Posts: 301

Re: Charging Tax on Surcharges

Nick,

I just came across this post because we just noticed surcharges are not being correctly charged tax on V8. Looking into the code, for some reason the cart is taking the surcharge and applying it to the ratio of each cart item over the total of the cart plus shipping. I'm not sure what the rational is here, but i believe this to be causing the tax to not be calculated correctly.

The V8 issue to the side, we are in the process of coming live with version 9 and the idea that surcharges will not be taxed is not acceptable. Tucking the surcharge, or the tax on the surcharge, in the shipping script is not very transparent and will not work for us. Can you look into how you can apply tax to the surcharge? Just for your information, the State of California considers surcharges taxable, I believe some other States may as well.

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#4 01-23-2020 10:38:56

webmaster
Administrator
From: York, PA
Registered: 04-20-2001
Posts: 19701
Website

Re: Charging Tax on Surcharges

Thank you for your comments, sppars.  The purpose of the custom surcharge in K9 is to provide a method to add a non-taxable amount onto an order in checkout (like a processing fee or subscription fee).  In order to add a taxable amount onto an order as you desire in K9, it would be best to use a custom function to add a taxable item to the shopping cart when necessary.  What exactly is it that you're charging for above and beyond the order that needs to be taxed?  I'm guessing it's not a component of any of the items and is not related to shipping in any way.


Nick Hendler

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#5 01-23-2020 14:35:03

sppars
Member
Registered: 01-25-2006
Posts: 301

Re: Charging Tax on Surcharges

Nick,

We have products that can be shipped full boxes or if the customer doesn't want a full box we will sell them the quantity they want but charge them a "box break" fee. Which is a common practice in our industry. In V8, we handle this through the custom surcharge. I can see how I can do this differently in V9, but still prefer the surcharge route.

However, we also have a new situation in V9 since minimum quantities are no longer available. We are going to tackle the minimum quantity issue by having setup fees via surcharges. We already do this for certain items in V8 too, but will have to apply it for minimum quantities as well.

In the scenarios above, the fees/surcharges are associated with the tangible sale of the product and therefore would need to be taxed.

I imagine we are not the only ones with this issue and I imagine CA is not the only state that taxes these surcharges. You mentioned custom surcharges are more for processing fees or subscription fees. I believe, even processing fees, if related to a tangible sale, would still be taxed. Subscription fee, I personally would probably handle that as an inventory item in V9. So when I read custom surcharge, my first impression is taxable. I'm sure each client will look at it differently and hence why having an option to have surcharges be taxed would make more universal sense.

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#6 01-27-2020 08:47:43

webmaster
Administrator
From: York, PA
Registered: 04-20-2001
Posts: 19701
Website

Re: Charging Tax on Surcharges

Thanks for the additional information.  Concerning minimum quantities, we have developed mods for clients in our custom shop that handles them and we're considering adding that to the next update.  Concerning taxes on surcharges, with the current system I think it would be best to add on an item when certain criteria are met, or an upcharge on the item level.  I'll further consider your comments and look into possible changes regarding taxation of surcharges in checkout.


Nick Hendler

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#7 04-20-2021 13:00:26

Murphys001
Member
Registered: 09-06-2014
Posts: 18

Re: Charging Tax on Surcharges

Hello,

Re: look into possible changes regarding taxation of surcharges in checkout.
The last post on this topic was just over a year ago.
Since then has there been any changes to allow VAT / TAX to be charged on a sucharge amount at checkout?
The OP is correct that for tangible goods any surcharge should be subject to VAT / TAX.

The reason behind this request is that I am considering implementing a low minimum order amount (with a low shipping cost) for light weight low value items that can be posted.
The current handling of minimum orders in K9 forces the visitor to increase their cart value (which increases the shipping cost) before check out.
I was going to use the custom surcharge method to automatically make up the difference between selling price and the minimum order amount.

Or would there be another way of handling this?

Thanks.....

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#8 04-21-2021 08:08:27

webmaster
Administrator
From: York, PA
Registered: 04-20-2001
Posts: 19701
Website

Re: Charging Tax on Surcharges

There have been no changes to this logic - surcharges are not taxed.  You could add the fee into the shipping charge to make it taxable.  You could do the surcharge if the fee is not taxable.  I don't think VAT would/should apply to a fee like this and the surcharge should be OK to use, however I am not an accountant, and do not live in the EU/UK.


Nick Hendler

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#9 04-22-2021 12:14:15

Murphys001
Member
Registered: 09-06-2014
Posts: 18

Re: Charging Tax on Surcharges

Hello Nick,

I presume the word / term "surcharge" is shown as a separte line item during check out with just one amount shown (rather than an apportined amount accross each individual item within the shopping cart).
Would this be correct?

If so, could the word "Surcharge" be changed on the checkout screen and on any "printed" documentation (eg a sales invoice / order confirmation)?
I beleive so as I recall one other user has had the term "surcharge" changed to "insurance" for recovering card processing fees.

Also, could a string of text be appended to the new name, including a reference to an amount calculated from within a custom surcharge script (which would vary on an order by order basis)?

For all of the above are we talking about a significant sofware mod?

This approach might solve my Brexit conundrum of how to handle EU sales to the UK for UK VAT & Customs Clerance fees for packages which are less than 135 in value (before the addition of VAT) whereby the customer is not a VAT registered business (ie an individual consumer).

I can write more in a support request.

Thanks....

Last edited by Murphys001 (04-22-2021 12:17:55)

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#10 04-23-2021 08:45:46

webmaster
Administrator
From: York, PA
Registered: 04-20-2001
Posts: 19701
Website

Re: Charging Tax on Surcharges

'Surcharge' is used internally.  You actually pick the display name in the surcharge script, so you can display anything you like - without any software mods.  The rate can be variable based on order total (usually is).  The surcharge script fills every requirement you listed (other than being taxable).  I recommend you check it out.


Nick Hendler

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