I have noticed as of late that the taxes being charged on orders (customer paying by credit card) has been incorrectly charged for my orders. First I noticed it was in Sep. 2020 and it was charging the customer an extra penny. No complaints as everyone thought it was just a rounding error and this is something most people will ignore. It's a pain to make entries for this in my accounting entries, but it was something I could deal with. Today (Jan. 06, 2021) I got my first order that was out by 3 cents, of course the customer was overcharged, but I no longer think this is a rounding error (nor are we dealing with rounding to the nearest 5 cents because it should have rounded down if that was the case). Here's the details;
Location: Ontario, Canada
Tax (HST): 13%
Subtotal (with shipping): $44.00
Expected Total: $49.72
Actual Charge to Customer: $49.75 (over by $0.03)
HST Expected: $5.72
HST Charged on receipt: $5.75
My biggest concern is when a customer confronts me with this. How do I explain that the system sometimes gets things wrong? I'm dreading this confrontation as it definitely won't look professional or trustworthy. Losing trust with internet sales is a guaranteed way to lose return customers.
Does anyone have an explanation for this? Is anyone else dealing with similar problems?
Hopefully this picture works. It's a pretty simple receipt with item prices at even 50 cent or dollar amounts. (in the image, item details were blanked out, everything else was unedited).
It's still ongoing, here's the next one that went wrong
Location: Ontario, Canada
Tax (HST): 13%
Subtotal (with shipping): $250.50
Expected Total: $283.07
Actual Charge to Customer: $283.11 (over by $0.04)
HST Expected: $32.57
HST Charged on receipt: $32.61
The problem seems to get worse (incorrect by a greater amount) as the total sale value rises. My individual sales are in the low hundreds of dollars, I feel bad for the merchants that might be selling high priced items. How much might they be overcharging their clients?
Here's my thought on the subject. You'll have to take this with a grain of salt because I'm making suppositions based on another item I've calculated on Shopify (merchant fee, I'm looking at you) and I understand that having only two samples is not enough data to base sweeping allegations on. However here's my explanation of my findings;
The standard way of calculating taxes in this case would be to take the 250.50 and multiply by 1.13 which arrives at a total of 283.065 which is properly rounded to 283.07, the total we expect.
What if you instead divided by the inverse, should it not be the same? As an example;
The taxes could also be calculated by taking 250.50 and dividing by 0.884955752212 (the inverse of 1.13 ... 1 divided by 1.13) which arrives at a total of 283.065 which is properly rounded to 283.07.
BUT what if you truncated the inverse calculation to 0.8849 (4 decimal truncation) and did the math. 250.50 divided by 0.8849 arrives at a total of 283.082 which is properly rounded to 283.08.
**NOW** we're off by 1 cent too much, which is very much like what I'm seeing, incorrectly, on the receipt.
Could it be that the developers have chosen to use an inverse calculation, are not carrying enough significant digits and it's affecting the result of the calculation?
Again, I'm just making suppositions based on what I'm seeing, and have no actual proof, but if I'm correct, might I suggest to the developers to stick to multiplication. From a coding aspect multiplication is much simpler, it avoids the whole division by zero issue and all the error checking processes that go with it.
As extra information that provides more evidence towards my idea, I've noticed the same sort of problems when calculating the merchant fee. That's a whole other story, and since that stays just between me, the merchant, and Shopify, there is no issue as long as I'm ok with it. However this sales tax issue is an entirely different set of problems as it involves a third party, the customer, that might not be "ok" with the overcharging.