How do you handle discounted sales tax?

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Explorer
96 0 18

Yesterday I did my Virgnia sales tax filing for the first time and discovered that they include a DISCOUNT on certain local taxes.  Noticed it because my county is one with a discount.  To be clear, I do mean discounted tax rate, not a tax applied to product discounts.  It's like this:

State tax:  4.3%

Loudoun County tax:  1.7%   (technically county is 1% and a regional transportation tax of 0.7%)

Below a certain sales volume, there is also a discount on the total sales tax of 1.116%

So for example, if I my taxable sales to Loudoun County this month is $100, I should have collected $4.30 (state), $1.00 (county), $0.70 (regional trans tax), for a total of $6.00, but then subtract the discount ($0.05) for an actual total sales tax of $5.95.

I do see that you can enter tax overrides based on locality but I don't see any way to enter a negative tax rate or discount.  Anybody know how to handle this in Shopify settings?

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Shopify Staff (Retired)
Shopify Staff (Retired)
338 0 55

Hi Sharon,

You can set up overrides, yes, but you can't set up a negative integer for the override. Is there a particular reason why you're setting this up this way and not just setting up the override to be the exact percentage (after discount) that is needed?

Alicia | Support Lead for Shopify
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Explorer
96 0 18

Hi Alicia,

I can't simply set up the tax rate as 4.884% (4.3+1.7-1.116) because that discount is actually applied against the tax not the taxable amount.  In other words, using my example from above, it's 1.116% deducted from the resulting tax of $6.00, leaving you with a total tax of $5.95.

I spoke with someone in another forum about this and then verified it with Quickbooks forums.  The discount is intended to be like a "commission fee" where the state allows me to keep 1.116% of what I collect.  It's not well explained in the VA state dept of revenue website.  Also, I don't see that the added hassle of computing the discount and doing the bookkeeping for it makes up for the tiny amount of extra income, but that's just my opinion. 

In any case (for anyone else reading this who stumbles over this), the Quickbooks forum people confirmed that yes, you collect the full 6%, but remit back to the state only (4.3%+1.7%) - 1.116% and keep that 1.116%.  They said that when you record the tax payment to the state in Quickbooks, you can tell QB to move the discount amount that remains in your tax liability account over to an income amount.  You should have an income account called something like "discounts" so that you remember where that money came from.

So, long story short, there's nothing missing from Shopify's tax setup.  It's just the state making things difficult, as usual.  :-)

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