exclude category from tax

[bmnkl]

In New York, items of clothing under $110 are not taxed by the state. We set up two tax rates: our Local rate (3%) and the State rate (4%). With items over $110, both tax rates apply (totaling 7%). Our problem is when higher priced items (which would normally have both rates apply) is discounted and the price falls below  $110. In this case, only the Local tax should be applied. We added an exclusion to the State rate to not apply this rate to certain categories if an item falls below $110. Problem solved? Unfortunately no--it didn't work. Would anyone know what we might be doing wrong? 

[TheRealChipA]

Hi @bmnkl.  I went into my POS and added a test tax rate to exclude that tax on items less than $5 (I’m an ice cream shop!).  Then I tested it on a test check and it worked fine.  So, can you possible do a few screen shots of how you have the state tax rate set up so I can possibly troubleshoot it?

Thanks,

[bmnkl]

Thank you for your reply! We appreciate the help. Here's a few screen shots. One is an item that was entered (showing the category as DENIM, and Taxes as NYS 4% and SAR 3% (SAR is local tax). The other is the way we entered the NYS 4% tax rate. Since this only applies to certain categories, we chose "Select items". The Items count increases as we add more items into the POS with this tax rate. The exemption rule is "If item price is below amount" and we chose 9 categories (tops, denim, pants, etc). When we enter the Denim item at full price both "NYS 4% and SAR 3%" are applied. But, if we enter the item and apply 50% off (so item price falls below $110) both tax rates are still applied. 

 

 

 

[TheRealChipA · Accepted solution]

Thank you for that detailed reply!  I believe I see the problem.  To clarify, you are NOT changing the item price, but rather you are discounting the item.  And you think that the sales tax should not apply to the discounted amount. In this case, you might have found a bug in POS.

It looks like the sales tax exemption is looking solely at the item price in your library.  While POS ultimately calculates tax on the after-discount amount, in this case those discounted items should not be taxed by NYS at all.

Let’s say Denim is $150 normally.  The sales taxes would be $6 + $4.50 = $10.50

But discounted it would be $75.  So sales taxes should only be $2.25.  I’m betting that POS shows the tax as $2.25 + $3 = $5.25

Because the item library price is still above $110, Square is erroneously using that to determine the exemption, when it should be using the price AFTER discount.

It sounds like a bug you’re going to need to call the Customer Success Team and report.  For now, you only have one choice, really — Change the price in your item library so that the exemption trigger works correctly.

Does that make sense?

[bmnkl]

Yes, you understand my problem perfectly. To add a little wrinkle...when we enter this transaction on the iPhone app, the correct tax is applied if we discount the entire transaction, but not when we only apply a discount to the one item. Does that make sense? I will call Customer Success Team and report as you suggest. Thank you again!