Issuing a partial refund with appropriate taxes

[paulfielding]

It appears that I can do two things:

1. Issue a partial refund by reducing the stock in the order.  Things appear to be tallied correctly when you do this.

2. Go down to the Refund total on the right and enter a manual number.

The issue here is that someone forgot to use a discount code, and I want to apply the discount.  However, that means they should also pay less taxes.  So, for example - if the item was $100 and they should have had a 25% discount, they should have paid $75 + 5% GST, for a total of $78.75.  However, they paid $105 because they didn't use the code.

To refund them the money,  if I manually refund them $26.25, it appears that Shopify doesn't reduce the taxes they paid, in the tax reporting.  What really should happen is I should be able to refund on the base price, and Shopify should then also add in the taxes that should be refunded along with it.  The same way it does automatically already, when you reduce the number of items in an order.

Is there something I'm missing here?  Or has someone worked out a way to do this properly?

regards,

Paul

[Max]

Hi, Paul. 

This is Max from the Shopify Team.

Thanks for articulating your issue with this refund and tax problem. This is something other merchants have mentioned as a pain point for their business, currently the workaround is to keep track of orders that do not match (taxes charged to taxes required for reporting). 

1. Refund the specific amount (like you mentioned)
2. Make note of these manually (in order notes or an external system)
3. Then calculate/ adjust when bookkeeping or at year end

This is definitely not as easy as the flow could be, so, we'd love to add your feedback to our team directly, as well. If you could reply here with your shop URL, we'd be happy to link your concerns with your account for better data and follow up on our side!

Cheers,
Max
support@shopify.com

[MrPunkin]

So this is an acceptable solution if you do a dozen or so orders a month. If you are handling 30k+ orders a year and have to deal with this for any partial refunds it becomes completely unacceptable. Please tell me Shopify has a plan for this.

Right now the burden falls entirely on our customers because we have to cancel their order (even if shipped) and create a new order with the appropriate taxes which we then re-capture payment on.

[Caroline_Brunel]

We are a high volume / high dollar value store. Tax reporting on partial refunds (with restocking fees) is also a pain for us, as we are trying to use the Shopify finance report for our bookkeeping. Tracking this externally is not a good solution. We use a 3rd party payment processor (Paypal Payflow) and tax amounts aren't passed to them so can't be tracking in their reports either.

We would very much like to see accurate tax reports that would pass CRA / IRS scrutiny. Handling tax amounts on partial refunds is a must for this platform.

[MrPunkin]

Even if Shopify has no desire to provide those reports themselves, they need to provide the tools to companies that do desire to step into the Tax game. As the Shopify API system works currently companies and integrations such as TaxJar can't accurately report taxes on partial refunds either. Please, Shopify, make this a priority.

[umiajhu]

I also would like to bump this thread/issue to highlight it's importance. I think anther big problem here is that smaller stores may not even realize that this is happening and simply issuing partial refunds and running the reports - and this is making their tax data wrong. Along with having the total Dollar Value upon which sales tax was collected (by state/tax region) displayed in the Finance > sales Tax report, this is another thing that is essential for online stores and where Shopify falls short. Now that my store is growing, this is becoming an increasing problem as more states are being added to collect sales tax from and I'm having to track them manually, and separately. Has any progress been made on fixing this? @Max 

[paulfielding]

And to be clear - it’s not like I suspect this to be a difficult feature to implement - shopify can work out all kinds of advanced tax calculations, this one is pretty darn simple. This should get done.....

[VivD]

Is there an update on this issue?  we have a substantial number of customers and we do promotion price adjustments often. I would think this is easy to implement. Otherwise, we have to be mindful of noting this all the time.

[MrPunkin]

Unfortunately it's 2020 and we still have no way to ensure tax gets refunded appropriately during partial refunds.

[Caroline_Brunel]

As it is not affecting their share price TSX:SHOP, it has not been prioritized. The result is an overpayment in taxes to CRA / IRS, which harms the merchant. I would really like to see movement on this issue.

Given that recently they have enabled the ability to Edit Orders, they should be able to add a field for taxes (percentage, or dollar value override) when calculating partial refunds.

CAN WE PLEASE HEAR FROM SHOPIFY ON THIS ISSUE?

This is not a blind rant, but a legitimate issue / gap in tax reporting.

[Roshan_Richards]

I would also like to see this feature.  It doesn't seem to me like it should be that difficult to implement on the refund section of the POS system and admin.  There could be a toggle switch we could turn on that would ask if the total includes sales tax refunded and it could automatically calculate that and send the appropriate information to our accounting software.  Keeping a list to adjust off of quarterly/annual taxes is a time suck that we just don't have as store owners.

Thanks,

Roshan Richards

Soaplicity

[NlevSam]

This is extremely frustrating. We’re on Shopify Plus using Avalara and we are having so many problems with partial refunds. Customers do NOT want to re-enter their credit card info nor should they. If we do a full refund, we’re at risk to not recapture payment when customer has the merchandise. Manual recording and adjustments are a terrible solution.

[Caroline_Brunel]

I am really not sure what it will take to get this issue looked at by Shopify.

Tax compliance is a big deal, and accurate tax reporting should be a given.

The fact that there is no handling of tax amounts on partial refunds is simply not acceptable.

[vicmaj]

Does this still (almost to 2023) not work with Shopify Plus with Avalara?

[MrPunkin]

I can't comment on Shopify Plus, but it still doesn't work with normal Shopify to calculate tax appropriately when issuing a partial refund without fully restocking a product.

[NlevSam]

It still doesn’t work in Shopify Plus with Avalara.

[Simon_G]

Same. Unacceptable and frankly an issue that could be fixed rather quickly...

Applying discount codes to existing orders would be nice-to-have as well.

And the possibility to edit an order by changing a product variant, deleting and re-adding a product, which also brings issues with any already-applied discounts. 

[roehamptonorchi]

Is there any updates on this Shopify 

[someBoringUser]

We are waiting for this, too.

[PDP_Bookkeeper]

It is becoming obvious that the accounting needs of Shopify clients are NOT a priority with Shopify; or this issue would have already been resolved.  When can we expect an appropriate response/action by Shopify to provide acceptable resolution for this issue?  Providing us with 'Manual' work-around steps with no proper action taken to resolve this issue over the past THREE YEARS is totally unacceptable!

[MrPunkin]

It is now almost 2022. What a shame we still can't accomplish proper tax accounting with our eCommerce software.

[Shop2000]

We just noticed when partially refunding an item because it has some defect Shopify is sending a net amount to our ERP which is wrong. Is there any way to have a workaround for this. We partially refund all the time. This needs to be fixed asap! Huge PITA

[PDP_Bookkeeper]

Shop2000, from what I've seen in the Community posts; this has been an identified issue at least since 2019!  It obviously is NOT a priority to Shopify.  I have worked out a very cumbersome tedious manual workaround to correct this Shopify error in reporting.  I use a spreadsheet to verify the sales tax calculation, and review the refunds with no tax to determine if tax is actually included in the total.  If so, I 'Manually' adjust the report; so I am reporting the correct Sales/Partial Refunds and Sales Tax.  Of course, I then have to make a manual adjustment into my Accounting System also.  Very disappointing that Shopify hasn't made this a priority to get fixed, and made what appears to me would be a simple program modification!

[PDP_Bookkeeper]

They key to having a 'Partial Refund' calculate taxes correctly is DO NOT 'EDIT' THE REFUND AMOUNT.  Always process the 'Partial Refund' as an EXCHANGE of original item at original amount for the SAME ITEM with Discount/Adjustment applied, and Shopify calculates appropriate Sales Tax on Exchange.

Shopify needs to REMOVE the EDIT REFUND AMOUNT button!!!!! 

[mjsupplyco]

Awesome! Thank you for sharing that, I just checked and it works. To
clarify for others, this option described by PDF_Bookkeeper is done by
going into the order, then clicking the "Edit" but and then making your
exchange there.

[Lisa13]

This is brilliant. I hadn't read all the way to the end to solve this problem. I called Shopify, and honestly, they have no clue. Their customer service person just said the same crap that they've been spouting for years. It's unbelievable to me how bad this is. But your workaround is perfect, and I don't know why they haven't figured this out. Thank you. 

[NlevSam]

@PDP_Bookkeeper @mjsupplyco  we have been editing orders to solve this. However the problem then becomes that the edited items are considered returns and the returns are way way overinflated on our reporting. I can’t figure out a way to differentiate real returns from these edit returns. For example: item costs $1000 and has 13% tax applied ($130). Should have been 10% off. So we edit the order (unarchive, cancel fulfillment, edit order) to remove and replace same item at discounted price of $900. But this shows up as gross sales of $1,900 and return of $1,000. Not good. We traded one problem for another. Or is there a way to avoid edits showing up as returns?  Thank you 

[Lisa13]

Mine didn't show up as a return. Mine showed up as merely an update to the order. 

[NlevSam]

Had you already fulfilled and archived the order?  Interesting.... we also edit orders when the wrong size was picked etc that for sure causes a return in sales....

[Lisa13]

No, the order had not been fulfilled yet. The customer called me immediately after placing the order, so it was very easy to add a new product, include the discount, and remove the other product from the order. I don’t know how it would have worked if it was already fulfilled…

[Sam-123]

You are completely correct! The method @PDP_Bookkeeper @mjsupplyco mentioned causes gross sales to be x2 and the refunds to be overinflated. Just traded one issue for another. The discrepancy is way worse this way as well as it's 2X larger gross sales on that order where the edit took place be exchanging the item. 

I made a screen recording to show the issue of partial refund so I hope everyone knows what's happening with net sales and why its underreporting . https://www.loom.com/share/bffc884184f140d69513171cc7e9fae2

Since partial refunds don't subtract the appropriate amount of sales tax, guess where this partial refund comes from? Net sales! Thus net sales will always be underreported and sales tax remains untouched thus overreported.  I feel like I'm in a black mirror episode. Come on @Shopify. Don't you know of any CPA's or bookkeepers that understand accounting, it's comical at this point. 

I'm reading complaints from 2018, that's 5 years ago!  I guarantee soo many small merchants are overpaying sales tax by counting on their Shopify Reports. And for those that understand what's going on, they need the extra administrative burden to untangle their accounting systems.  

[Sam-123]

@PDP_Bookkeeper  The problem with this method though is that returns will be way larger than they should be and gross sales will be doubled counted. Because you are "exchanging" the product and re-adding the same product to the order, it causes gross sales to be 2x greater and now you are giving a full refund of that product but it was only suppose to be a partial refund.

Just so you are aware, you're solving the sales tax issue but returns and gross sales will be highly inflated which is really not ideal at all.

For example if the product is $1,000 + ($120 sales tax) and you remove the $1,000 product, re-add it and give 15% off, this will cause gross sales to be $2,000 but it should only be $1,000. And the refund will now be $1,000 but it should only be $168 if you are refunding 15%.

Thus Gross sales is  $2,000 when it should only be $1,000 and the partial refund is $1000 instead of it really being $168. 

Accounting and reporting is so important and I'm so frustrated with @Shopify for not allowing us merchants to give partial refunds and reducing the appropriate amount of sales tax. 

Also when giving a partial refund the normal way, it subtracts this amount out of net, so net sales will be underreporting and sales tax is overreporting, which I'm sure everyone is aware of in this thread.

I made a video here showing the issue so others can at least understand what is happening without them probably knowing. https://www.loom.com/share/bffc884184f140d69513171cc7e9fae2

Huge shame on Shopify for crippling merchants in the reports. It's 2023! Partial refunds are such a common practice in e-commerce. @Shopify  You're basically  crippling every merchant who counts on this data. Learn how accounting/bookkeeping works before implementing strict limitations on the refund process that skews data completely.  Every other e-commerce platform gives the admins the ability to adjust sales tax correctly on partial refunds. Get this fixed!!

[shopcurato]

This is also a huge problem for my shop and my accountant is always getting frustrated with this system. 

We are a high volume / high dollar value store. Tax reporting on partial refunds (with restocking fees) is also a pain for us, as we are trying to use the Shopify finance report for our bookkeeping. Tracking this externally is not a good solution as my accountant has to spend time sifting through the orders to find the amounts and break them out themselves on quickbooks. Which every month leads to continued frustrations on both ends. 

We would very much like to see accurate tax reports that would pass CRA / IRS scrutiny. Handling tax amounts on partial refunds is a must for this platform.

[bruceeeee]

Shopify Plus user here - migrated to Plus so we could utilize Avalara. Absolutely crazy that Shopify doesn't have native functionality to process partial refunds and calculate taxes on those. We need this for many use cases, including the below. Please support this Shopify - this is not a want, proper tax calculation and integration with Avalara is a NEED.

Use Cases:

• Customer forget to enter discount code
• Return of items with restocking fee
• Courtesy $***.** refund for upset customer

[lesleyRB]

It is year 2021 now. hope this can be solved soon.

We also provide partial refunds to customers when there are small blemishes with the product for them as a compensation or incentive to keep their purchase.

It is frustrating when reporting is not accurate.

When our volume goes up it will certainly be a pain

[mjsupplyco]

@Shopify Are you guys there? This is extremely unfortunate you guys haven't added a solution for this yet. Almost 2.5 years later. This issue happens all the time for us as well. On Amazon, this has been a feature since day one, for obvious reasons. 

You are killing small businesses by over reporting tax. This should be such an easy feature to fix. Come on guys, lets go

[umiajhu]

It's been over 2 years since writing my first reply. This needs a fix. Manually keeping track of these isn't possible anymore (and wasn't in the beginning). When you start shipping to states that have multiple levels of sales tax: State, County, City, Local (Illinois) for each order - it's simply not possible. This needs to gain some traction... Is there any roadmap to getting this 'fixed'? @Shopify  @

[mjsupplyco]

Agreed! @Shopify what do we have to do for you guys to listen? So many other platforms have had this for years. This isn't some simple nice to have function, we are talking about taxes here which is essential for every business to deal with. And is quite a big deal. Come on @Shopify 

[PDP_Bookkeeper]

They key to having a 'Partial Refund' calculate taxes correctly is DO NOT 'EDIT' THE REFUND AMOUNT.  Always process the 'Partial Refund' as an EXCHANGE.  Exchange the original item at the original amount for the SAME ITEM with any appropriate Discount applies.  This way, Shopify calculates the appropriate Sales Tax on the Exchange.

[NlevSam]

Can you please clarify what you mean by processes an exchange? Is there a new “exchange” function? Or do you mean process a new sales order, refund original in full and capture payment again? We have always been able to do that. Unfortunately recapturing payment is not realistic for many businesses. If there is a new function to exchange, can you please show us how?

[DJINC]

@PDP_Bookkeeper It's a good idea in certain scenarios, but yet another flaw in Shopify is you can't EDIT orders marked for "Local Delivery" for some stupid reason. Yet one more thing that makes no sense whatsoever 🙄 . 

So, in summary, I, too, had a customer who forgot to use a discount code. I simply need to be able to apply a code (so they can't use it again) and refund the correct amount, including the tax liability. 

However, Shopify WON'T:

1. Allow us Apply discount codes to paid, unfulfilled orders 
2. Allow us to even EDIT orders marked for Local Delivery 
3. Deduct State, City, County, Local taxes from refunds 

I appreciate these forums, but it's a shame so many folks are forced to do extra work to come up with some creative workarounds for all of the basic functionality missing from this $5+Billion company's platform. Running a small business is hard / expensive enough without having to deal with headaches like this or pay extra for apps / plugins to make up for basic shortcomings. 

[Sam-123]

I'm with you 100% with all the points you mentioned. Shopify is making this so painful for us merchants. I'm honestly in disbelief that this thread doesn't have 100,000 angry merchants complaining about this?

How is this not front line news, it's horrible! We can't adjust the sales tax out of partial refund and expire coupon codes for customers. The largest issue of them all is the reports being 100% skewed. There is nothing worse than having incorrect financial information. Every single merchant who has ever issued a partial refund will have under-reported net sales and over-reported sales tax.

[NataD]

I am with you on this. We just recently moved our ecomm on Shopify, and I wish I had known about this problem before we committed to Shopify. It's insane for our accounting department to manually make adjustments in Avalara because Shopify doesn't have this functionality. The fact this problem has been known for years and they have done NOTHING to fix it, makes me think they don't care about their customer at all. 

[Sam-123]

It's March 17th 2023.  Why has Shopify not done anything about this! This means that any merchant who gives partial refunds will have incorrect reporting and will have to manually keep note of every single partial refund in their accounting system so that sales tax isn't overly paid by accident and that their reporting is accurate. 

Many small merchants probably use reporting in Shopify as their bookkeeping so if they are remitting sales tax based on the amounts displayed in Shopify tax reporting they are overpaying sales tax...  How can Shopify brand themselves as empowering merchants when partial refunds don't adjust sales tax... This is crippling merchants.  Merchants also use apps to connect Shopify to account software. This brings crippling problems to these merchants as well.

If you give a partial refund. Why or why or why wouldn't Shopify deduct the appropriate sales tax from this partial refund. This leaves the native reporting tool on Shopify completely wrong and makes extra administrative work for Shopify Merchants to have to manually keep track and adjust in QuickBooks or other accounting software. This is NOT a scalable solution to have to manually do this for every single customer who forgot to put their coupon code in.

Also, if a customer is exempt from sales tax and you want to only refund them the sales tax portion of the order. You can't... This means refunding them them a partial refund would make gross sales and taxes even more skewed.  This makes me really miss Woo Commerce and other platforms.

One, if not the MOST important aspect of Ecommerce is "accounting", and this has to be the biggest joke.

[Sam-123]

This sounds like the best news yet. On the 6th time of reaching out to @Shopify Support in frustration regarding these issues, showing the detailed screen recordings on how the reports are skewed.  I finally got an answer that looks promising. 

I've attached a screenshot of our conversation and you can see outlined in green that they have determined the issue and plan to fix it within 48 hours. I can't believe my eyes when I read this.

I'm not going to count on it but this seems very promising!! I guess we'll wait and see. 

[PDP_Bookkeeper]

Thank you so much for this new! I am anxiously awaiting, but not getting my hopes up!

[NataD]

it's August 22, 2023 and nothing has been fixed.

[tw_usa]

Has anyone yet to see this issue fixed? Sales tax not being refunded on partial refunds is absolutely ridiculous.

It has certainly past the promised 48-hour turnaround time that @Shopify gave @Sam-123 ... am I being too hopeful?

Is there a third party app we can use for this instead?

[Sam-123]

I just tested it and nothing has changed unfortunately.  Support mentioned to reach back out if there are any issues so I'm reaching back out to support now. I need to get a clear understanding of what "issues" they are fixing with the reports and analytics because his response was rather generic. 

Support responded to my complaint that  they "determined a wider issue that was effecting the analytic dashboard as a whole".  It wasn't very clear what that even meant and I told them "The only way to fix this is to add a checkbox on the refund page that says "apply coupon code to order" and/or "refund sales tax" or something like this. There has to be some sort of check box on the refund page to instruct the database on what to do.  So if there isn't some kind of checkbox on the refund page to select, the issue will never be fixed, unless the refund is automatically refunding the sales tax by default. That's a possibility.  But I just tested it and nothing has changed.

In the back of my mind I was definitely hesitant to think that my complaints would cause the reports feature in Shopify to finally be noticed and to be completely revamped and fixed, but that's what he said! I don't think all hope is gone since why would he say that statement that they are fixing it in 48 hours, that's a bold statement I don't think staff would say for no reason. But I also don't know what "issue" they are changing to the reports as it wasn't clearly stated to me. 

I'll keep checking and testing but I think it will take more than week to get somewhere with this.

We'll stay connected for sure, hope to get some good news soon!

[PDP_Bookkeeper]

Hi Sam-123,

Thanks for the update, and the continued trials on the system! Hopefully, the right person has finally gotten involved; and will take action finally get this issue resolved!!

Thanks!
PDP_Bookkeeper