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Why does Square take a percentage of tax and tip?

Why does square take a % fee including tax and tip?  Why are these expenses not exempt?

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Re: Tips

Square fees are taken out of any amount that is charged to a credit card regardless of if it is an item, service, tax, or tip.  money is money to Visa and MasterCard and the credit card companies and will charge their fees on anything that is processed thru them.

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@One2, if the tax and tip are being paid for with a credit card, Square will take the same percentage that they take for the base amount.  This is because the credit card processing fees apply to all amounts that are charged.  Credit Card companies (like MasterCard) charge fees on all amounts to credit card processors (like Square).

 

For a deeper explanation and more context on what goes into this, have a look here: Understanding Our Fees | Square PaymentsOr this informative video below!

 

 

[This reply was edited by a moderator on August 26, 2020 to offer more visibility into Square's pricing.]

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Best Answer

@One2, if the tax and tip are being paid for with a credit card, Square will take the same percentage that they take for the base amount.  This is because the credit card processing fees apply to all amounts that are charged.  Credit Card companies (like MasterCard) charge fees on all amounts to credit card processors (like Square).

 

For a deeper explanation and more context on what goes into this, have a look here: Understanding Our Fees | Square PaymentsOr this informative video below!

 

 

[This reply was edited by a moderator on August 26, 2020 to offer more visibility into Square's pricing.]

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Can square fees be adjusted to only take from sales transactions exclusing tip amounts. I am losing out on every transaction when I am paying out tips to my employees.

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Super Seller

The fees come out of the total because that is the total transaction amount.  To credit card companies it doesn't matter if it is a sales tax or tips it is all money that is being transacted and therefore all is going to be subject to the transaction fees.  there is no way to avoid the transaction fees from Square on tips because square also incurs the fees on all the money it is processing thru the Credit Card system.  

 

Just like on your personal credit cards sales tax and tips aren't separated out on your bill and handled fee free.

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Beta Member

I really don’t like how fees are taken out of my tips.  I don’t ask for tips, people give them to me.  They are a continued generosity for the service I provide and I think its wrong for Square to take that money.  I’m a massage therapist working for myself.  Especially now, in this pandemic, every penny counts.  

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I am aware that this is an old question, but I want to provide a different perspective so that you can get out of the feeling of being robbed by fees on tips.

 

Think of the fee on tips as a:

1) Fraud prevention:  "I'll provide my product/service for $1, but please use the tip feature to pay me the rest so I don't incur any fee."

 

2) Convenience fee:  "Customers want to tip me, but they don't have have any cash on them.  They only have have a debit/credit card with them.  I don't want to miss out on any extra free money.  I'll gladly pay someone to convert credit card payment to "cash" for me.  

 

I also notice that credit card users tend to tip a lot more than cash paying customers. It's worth the fees in the end.  My average credit card fees went from 2.75% to 4.5% after Square switches to the new fee structure (additional charge per swipe).  It hurts seeing how much I could have made more,  but it's better than nothing in this cashless society. 

 

 

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Is the square percentage / fee taken from tips as well??

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Super Seller

Square fees are taken out of any amount that is charged to a credit card regardless of if it is an item, service, tax, or tip.  money is money to Visa and MasterCard and the credit card companies and will charge their fees on anything that is processed thru them.

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So is the amount listed on the reports screen for a given week the tip amount with the fees already reduced or not?

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Super Seller

Reports do not show fees taken out of items, services, tips, or taxes.  for example, if an item was sold for $10 the report would show the item sold at $10, not $9.72.

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After our first Small Business Saturday using Square, I pulled the reports for the day.  I understand that we pay fees on credit card dips/swipes, etc.  However, why are we charged on taxes collected?  This seems like it's cutting into our profits further by Square keeping the percentage on the amount that goes off to a government institution.

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Alumni

Hello @Dar-lin - sorry for the confusion about our fees as it relates to Taxes. Another seller asked the same question about tips. I've moved you over to this thread  to check out the best answer posted by our Super Seller, as he explains how our fees work. 

 

I hope this helps!

 

 

Justin
Community Moderator, Square
Sign in and click Mark as Best Answer if my reply answers your question.
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Just wondering?

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Super Seller Alumni

Yes, Square takes their processing fees out of everything that's in a charged/debited sale.  Here's a link to their fees page, where you'll find this information.  Scroll down to the section titled "Need-to-Know Facts About Square’s Payment Processing Fees", and you'll see this: "Payment processing fees are taken out of the total amount of each transaction, including tax and tip.".

Judy T Shumway
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