feedback? taxes and coupons in multiple ship to

[Logan Rhodehamel]

I wanted to open up this discussion to anyone who wants to offer a point of view. We have been unable to determine the "right" way to factor in order coupons as they pertain to mixtures of taxable and non taxable items in multiple ship-to scenarios.

Here is a realistic example of the problem. In Washington, we have to pay sales tax of around 8 percent. Some things (like food) are exempt from tax.

Suppose I am shopping at an online gift shop. I purchase a stuffed animal (taxable) for my neice and a few chocolate bars (nontaxable) for myself. At checkout, I want to send the stuffed animal to my sister's house and the chocolate to me (two shipments).

I have an order coupon for $10 off an order that I intend to use. For simplicity, let's assume the shop offers free shipping and we do not need to factor this in. It's not relevant to the question anyway.

This scenario gives me a basket like:

SHIPMENT # | ITEM | COST
1 | Stuffed Animal | $20
1 | 8% Sales Tax | $1.60
2 | Chocolate | $10
- | $10 Off Order | -$10

What we are looking at is how the order coupon should impact taxes.

Should the 8% tax be factored on $20 (the cost of all taxable items)?

Should the 8% tax be factored on $10 (the cost of all taxable minus all of
the order coupon)?

Should the 8% tax be factored on $13.34 (the cost of taxable items minus the
taxable items relative share of the coupon)?

[jmestep]

In Ohio, you apply the sales tax before you apply the coupon. 8% on $20, for example.

[Logan Rhodehamel]

In Ohio, you apply the sales tax before you apply the coupon. 8% on $20, for example.

I probably should mention, this is the way it works currently. That is based purely on my observation that coupon fine print often says that you are still responsible for all taxes and fees.

[nickc]

In Washington, DOR gives you the choice. You can calculate before or after discount, you just have to be consistent on every transaction.

I'd vote for the even-handed approach - that's how this would work for a % based discount, yes?

So - two iterations of basket contents, with an option for the sequence (tax before or after)
1) Calculate discounted item total: item_total/basket_total * coupon_total (until you get to the last item, then sum all other items discounts, subtract from coupon_total, subtract from item_total)
2) Calculate tax (if applicable) on item total: item_total * tax_rate

-Nick

[Logan Rhodehamel]

Judy, regarding Ohio, see this page:

http://tax.ohio.gov/faqs/content/sales_and_use/qa02.asp

Question 21, it seems that our coupons are promotional / marketing tools and would fall into the category of reducing the tax base. What do you make of that?

[jmestep]

I stand corrected-- you are right, Logan. Able coupons and discounts would reduce the tax base. Maybe I'd better read more of the small print in the Ohio tax laws!

[cf_susan]

We need the tax to only apply to the final total (after the coupon is applied). How can we make this happen?

[lab_n_chemicals]

This is exactly the way its done if the coupon is a manufacturer's mail-in/ POS coupon which is always product specific.
1st option: The shop (eg Best Buy) charges full price + sales tax and customer mails the rebate / coupon. DOR is happy.
2nd option: They deduct the coupon value at POS and charge sales tax based on price before applying coupon. They can (and should) do this since their supplier/manufacturer pays them directly the value of the coupon and this income is based on a taxable sale. DOR is still happy.

"In house" product/service coupons are handled differently. Taxes are based on [price - coupon value] for taxable sales that must ALWAYS meet a MINIMUM dollar value. All the ones I've seen are only applicable to a certain department or group of products. For example all stuffed animals from vendor XYZ that MEET or EXCEED $20 (OfficeMax coupons are a good example).
The sales receipt looks like this:
SHIPMENT # | ITEM | COST
1 | Stuffed Animal_1 from XYZ | $20 - T
- | $10 Off Order | -$10 - Coupon //coupon applies (>=$20) & deduct before tax
2 | Chocolate | $10 - N/T
1 | 8% Sales Tax | $0.80
DOR is happy (and so is the CPA).

In my case, we offer a 20% "in house" type coupon if the sum of all the list prices of a specific vendor's products meets or exceeds $200. These items span several categories and subcategories.
I set this up in AC7. AC7 does this nicely. Thank you.
However, AC7 calculates / displays the 20% off coupons at checkout only. AC7 needs to calculate / display coupon discounts BEFORE they checkout, ie as applicable items are added to the cart. Customers are not going to keep all the items in the cart if they don't see the discount even if I declare the coupon value all over the page. They are not going to "checkout". They'll assume the site or the cart is not working correctly. They'll cancel or leave.

Would you click "checkout" if your cart with 15 items totaling over $200 did not show the coupon discount it promises? Customers need to see the coupon take effect when they add the applicable products to the cart before they will checkout.

I hope you can modify coupon behavior.