Is there a way to "Back Out" Sales Tax? It doesn't seem possible to set up my sales tax without rounding errors!

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ddunietz asked Nov 13, '19 who-still-has-usernames answered Jun 21, '22

Is there a way to "Back Out" Sales Tax? It doesn't seem possible to set up my sales tax without rounding errors!

I include taxes in all my pricing. If my menu say's $10, that's what the customer pays. With Square, there was a simple setting toggle that allowed me to either "Back Out" the sales tax from the item, or tack the tax on top of the total. After spending hours on hold today, it seems like Clover doesn't have the capability to back out sales tax. I tried doing it manually by using the formula PRICE/1+.0775 (My effective tax rate), but Clover rounds the number to the nearest cent and therefore rounding errors abound. I really don't want to use clunky, error-prone workarounds that will ruin my reporting capabilities by manually calculating sales tax daily or even quarterly, but I don't know if there's another way unless I find another POS system. Please help!

Taxes

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Answer 1 · 2019-11-13T11:25:26Z

brokenoval answered Nov 13, '19 zhm commented Mar 18, '20

Tax is a pretty common question here actually so I'll link a previous thread with a thorough explanation of how it works. I believe the tax actually works very well on Clover but it takes getting your head around to understand the logic.

Broadly speaking, if you try to take quarterly sales summaries and calculate your tax based on the revenue, you will always calculate incorrectly. This actually makes sense though, because people pay tax at the ORDER level so the point at which you round is important. People also can only pay down to the nearest cent so it has to be calculated like this to get the actual figures rather than an estimation. To further complicate it, tax is done and rounded at the ITEM level, so your approach of taking the Full price and applying tax probably won't work all the time.

See a previous explanation here: https://community.clover.com/questions/18435/function-for-calculating-total-tax-of-an-order.html

With regards to removing tax from the order, maybe I don't fully understand what you're trying to do, but a work around might be to create a discount or have 2 separate menu options, one with tax and one without.

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ddunietz commented · Nov 13, 2019 at 07:35 PM

Hi @brokenOval,

Thank you for taking the time to respond! While you’ve provided valuable information regarding Clover’s tax processes, I do not believe you’ve answered my question, so I’ll try and clarify. I need to charge a specific final selling price that includes tax as a fraction of the price, and I need to be able to “stack” items—all hitting that same specific selling price. For example, my Clam Chowder is priced at $9.50 – including tax. I need to be able to ring up a Clam Chowder and have it come out to exactly 9.50. Since there doesn’t appear to be a setting for tax-inclusive pricing, I went ahead and did the math manually: I set the selling price for the Clam Chowder bowl to $8.81670533643 so that when the system adds the 7.75% sales tax to the order (.68329466348), it would come out to exactly $9.50. However, because of Clover rounding to the nearest cent, when I add a second Clam Chowder bowl to the order, the total comes out to $19.01. This is not the price advertised and will mess up our drawer every time.

Some items, such as a simple bread slice, cost $1.50. It is impossible to set up the Clover system for an item to hit $1.50 after tax. Because of the automatic rounding it will either result in 1.51 or 1.49 final selling price.

I found this work around on the ShopKeep website (included in second post), as it seems like they have a similar issue, but based on what you’re saying regarding having to round the sales tax to the nearest cent I’m now unsure whether even that will work. Please advise!

Thank you!

-Dan

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varner ddunietz commented · Jan 25, 2020 at 10:47 PM

I take it you didn't find a solution to this within the clover POS system? I encountered the exact same problem when I switched to square and I still haven't come up with a solution. I end up with tickets with two items that should ring up to $10.00 when tax is added yet they are $9.99 because one item rounds up but the second causes it to round down.

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ddunietz commented · Nov 13, 2019 at 07:35 PM

Here's ShopKeep's work around:

Include Tax in Pricing

Because inventory items cannot be set as tax-inclusive, we recommend the following workaround to include tax in item pricing.

Adjust the sales price and taxable status of items.
a Update each item’s price to include tax.
b Make these items non-taxable.
Move each group of items taxed at a different rate into its own separate department.
Example:
Drinks taxed at 8.75% in a “DRINKS” department and food taxed at 7.75% in a “FOOD” department.
Move all untaxed items into yet another department to keep them separate.
On the business's receipt, add a line telling customers that tax is included in pricing.
Follow the steps below to back the tax out of each department's total sales.

Back Out Tax Amount

Follow these steps to back the sales tax amount out of the total sales for each department.

Run the Sales by Department report.
To get the pre-tax sales amount, divide each department's net sales by 1 plus that department's tax rate.
Example:
- Tax rate for the FOOD department: 7.75% or .0775
- Total FOOD net sales (includes sales tax): $18,295
- Total pre-tax sales amount = $18,295 / 1.0775 = $16,979.12
To get the sales tax amount, subtract the pre-tax sales amount from the department's net sales.
Example:
- Total FOOD sales tax = $18,295 – $16,979.12 = $1,315.88

-Dan

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zhm ddunietz commented · Mar 18, 2020 at 12:45 AM

Even though Shopkeeps solution is better than nothing right now, it doesn't allow for Clover to report the tax, which just means manual work every month or quarter. This should be easy enough for Clover to implement, hope they do it! Also thanks for sharing!

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Answer 2 · 2022-06-21T22:09:25Z

who-still-has-usernames answered Jun 21, '22

Clover is the only POS I’ve ever used that doesn’t allow tax inclusive pricing, and I’ve used at least a dozen. It is such a standard, basic feature, that clover has been aware of for years and they still have not addressed the issue.

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