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Rounding sales tax problem
majohnboy
Member Posts: 7
Hi,
I need to invoice somebody for $306.25 + $30.62 sales tax = $336.87. This is because I have the booking agreement already where the client has rounded the 0.5 cent sales tax down.
However, with wave apps, the sales tax is automatically entered in using the 10% calculation.
When I enter $306.25 (ex tax), the tax is automatically calculated at $30.63. This = $336.88.
If I change my total (ex tax) I cannot make it land on $336.87. eg. I change to $306.24 (ex tax), then my tax is calculated to be $30.62. Total = $336.86.
This means that when I get paid I am going to have a transaction that doesn't match my invoice. Is there any way I can solve this problem?
Thanks!!!!
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Comments
Hi @majohnboy.
The rounding rules in Wave cannot be changed. Your taxes will always be rounded to the nearest cent. You could modify the invoice and add an item called "Rounding adjustment" for an amount of - $0.01, which would bring down the total amount of the invoice and wouldn't have to be affected by a tax.
With that said, I would strongly recommend talking to an accountant about the laws surrounding rounding in your country.
@Alexia, it appears to me that the rounding rules aren't doing what you said above. Example:
1212.37 * 15% = 181.8555
Wave is rounding that to 181.85 when it should be 181.86
Hi @awaycott.
I just tested it on my end and it seems to work fine. Can you try it again and share a screenshot? Mine looks like this
Can you tell me what currency you're using?
@alexia, sorry about that. My problem is on a Bill, not an invoice. Try it there.
I just tested this further. In my case (on a bill), I actually have 2 lines:
Line 1 is $1035.00
Line 2 is $177.37
If I enter a single item for $1,212.37 I get the correct tax calculated @ 181.86.
However, if I enter the 2 above:
Hope that is more clear.
Currency is Canadian Dollars.
Hi @awaycott.
It's also looking fine for me from the Bills page.
Could you send me a few screenshots of the process on your end? Just so we can better document what's happening.
Hi Alexia,
The problem occurs when you have multiple items on the invoice and probably on various other forms (bills and etc.).
Example:
Item 1 : 100.05 (taxes rounded to 10.01 => real taxe 10.005)
Item 2 : 100.05 (taxes rounded to 10.01 => real taxe 10.005)
Total : 200.10 (addition of the rounded taxes to result 20.02 instead of 20.01)
Hi, @YellowMachine.
Wave always calculates taxes per item, not based on the total taxable amount. This isn't an issue with Wave, but a deliberate choice. It's generally considered to be the better way to calculate sales tax on an invoice and is favoured in most countries.
I am from Canada and process many invoices in my job and I have never seen an invoice where the tax is calculated in this fashion. This also causes problems on the other end as well for the people that are paying the bills. When the invoice is entered into accounts payable, the software won't accurately calculate the tax paid and it will have to be overridden. Its really unfortunate that there is no option to let the user decide how the tax is treated as I am now considering switching over to another accounting software simply because of this issue.
Hi, @cunninga.
Thank you for your feedback on this subject.
While there is no way around that in our software at this time, you could simply to add/discount item on the invoice for $0.01 to match the amounts on your bills and mark it as an adjustment entry for the time being.
Hi Alexa, is there an option to use taxed amount straight away? E.g. the amount of $115 included a tax of 15%, how can I enter the full amount of $115 to the invoice without needing to manually calculating back to the net amount, i.e. $100? At the moment I have to do it manually all the time and it takes unnecessary time and effort. Your support is highly appreciated.
Hi, @Hilly,
Not on invoices, no. Taxes are never calculated backwards on invoices, they have to be added on top the price for each of your line items. You can set those line items to be linked to taxes by default on the "Products and Services" page, however. That might help out, depending on your pricing structure.
I am in the same situation here. Also from Canada, one of my client was never paying the "real amount" of my invoice... a few cents less all the time. At first I was just thinking they made a mistake (xxxx.85$ instead of xxxx.89$), but after a few invoice I checked a bit further and realized my totals were not correct, from our way of calculating it at least. I most of the time have many lines in my invoices (15+) and it's bad to always have to calculate the real total and adjust. And then after it's on the total of sales tax collected that the problem will also arise... a few dollars at the end of the year. Not a big deal regarding the amounts... but very bad in accounting books.
Anyway, I get the point where it may be a better way (accounting point-of-view) to calculate it, but no matter if it is, it's not how it's done here and it makes the process just not as easy as it should be. So I will join my voice with cunninga user above and request that to be an option we can choose, as it's really causing pain in my accounting here.
Thanks.
Hi @Mathieu. Thanks again for giving your feedback on this particular issue, I've made sure that your voice is heard on resolving this for our future rollouts. We understand that this can be tedious (in terms of the workaround, creating a separate transaction etc) -- but want to make sure we carefully determine what is causing the problem and how to fix it to align with our code. Again, I appreciate the input and hopefully we have a resolve for this in the future.
I would like to know if this issue was resolved. I am in the Netherlands and I have the same issue. My books sells for 17.50 including tax. This 17.50 cannot be changed by law and is the price given to customers. But in Wave I cannot enter the price including tax (on an invoice e.g.), I first have to enter the amount excluding tax. The system then adds the 9% value added tax. But whatever amount I enter, I can never get to 17.50. It is either 17.49 or 17.51.
REading the above, I assume there is no way to correct this (without adding another line of one cent, which just does not work for my invoices/customers), but can you please confirm?
I just do not understand this. I used Eazysoft for a while and it had the option to include or exclude the tax when you enter the price of on an invoice. Thank you.
Hi @ArletteD . Are you invoicing your customers and receiving processed payments through Stripe, or are you receiving payment outside of Stripe and manually marking your invoices as paid?
, I do not use Stripe. It is all manual.
Hi @ArletteD thanks for getting back to us about this! It helps to know that you're handling this manually (as that means it's not impacting your payments directly). However, as you've pointed out, this makes invoicing your customers more difficult. Further to Jamie's comments above, we're taking note of all the feedback that's shared. As rounding is a bit different for everyone, understanding the impact to your business is key. I can definitely see why this is frustrating and if there are any changes to how we're handling this going forward we'll follow up here. Thank you for your honesty and taking the time to share your experience with us.
Hi. I would like to confirm that in Australia, where an amount of GST includes a fraction of a cent, special rounding rules apply. These are quite complicated, but are in place to allow Total Sales to have the 10% Goods & Sales Tax component included correctly, while still allowing even figures.
For example, a total sale of $60, including 10% GST should be charged as $54.55 ex-tax + $5.45 GST - in this case the GST is rounded down, because it is calculated as 1/11th of the total, not as 10% of the ex-tax amount.
The rules are explained in detail on the Australian Taxation Office web site under the heading, Rounding of GST here:
https://www.ato.gov.au/business/gst/tax-invoices/
The GST Tax Invoice should not include a "rounding" adjustment, as the Sales Tax amount needs to be displayed and charged correctly. The correct rounding is also needed for Business Activity Statement reporting, which is most often done quarterly by SMBs in Australia.
@Zeafer thanks for clarifying all of that; this is good to know as we continue to refine the way Wave handles these calculations. I can't guarantee that we can make changes that are this granular, simply because Wave's a global product and everyones' needs differ based on location. That said, this is still incredibly useful information. Thank you!
The workaround I have used in other systems, is to set the GST Sales Tax at 9.9999%. This results in the correct rounding every time - but displays 9.9999 on the Invoices. If the displayed amount could be rounded, while the calculated amount is accurate, this would suffice. Even just the ability to display the Tax NAME only, and not the % amount would be sufficient. Perhaps the option to hide the Sales Tax % from the invoices would be easy to implement.
Hi , I am also from Canada and specially from Quebec. I have now over 115 invoices mark due because my customers are paying with the right tax calculation so the invoice is entered in their software and the checks issued always short by 1 or 2 cents.
Example my total is $506.45 with 9.975% ($50.53 in invoice) and 5% TPS ($25.34 in invoice) Total $582.32
The right calculations will be $506.45 with 9.975% ($50.52) and 5% ($25.32) Total $582.29
This creates a charge of 3 cents more than the customer does not pay and this makes the tax calculations completely wrong.
Is there a way to fix this issue. 2 cents might not be a big problem when buying a pack of cigarettes but if multiplied by 1000 customers is a big headache for accounting dept.
@onda I am experiencing the same issue as you are. I cannot send out any bills until the GST is calculated correctly. Please is there a solution to this?
I guess there is no way to fix this issue?
Hi , I am also from Canada and specially from Quebec. I have now over 115 invoices mark due because my customers are paying with the right tax calculation so the invoice is entered in their software and the checks issued always short by 1 or 2 cents.
Example my total is $506.45 with 9.975% ($50.53 in invoice) and 5% TPS ($25.34 in invoice) Total $582.32
The right calculations will be $506.45 with 9.975% ($50.52) and 5% ($25.32) Total $582.29
This creates a charge of 3 cents more than the customer does not pay and this makes the tax calculations completely wrong.
Is there a way to fix this issue. 2 cents might not be a big problem when buying a pack of cigarettes but if multiplied by 1000 customers is a big headache for accounting dept.
Hey there, @Carol12 @onda
When it comes to tax rounding at Wave, this process is completed on a line-item level. What this means is that each product line will calculate the tax, round to 2 decimal places, then do the next product line. At the end, it will add up all the line item tax calculations and plug that in as a total tax in your invoice. Unfortunately, there is no way around that in our software at this time.
As a potential temporary workaround, feel free to add/discount a new invoice item for $0.01 to charge the right amount and mark it as an adjustment entry for the time being.
I understand this is a workaround at the moment, but I'd recommend reaching out to an accountant about this. They may suggest playing around with some newly created dummy asset accounts in your Chart of Accounts to offset these numbers.
Hi,
This is a MASSIVE problem - we are being forced to enter incorrect supplier bills just to fudge the figures leading to illegal TAX accounting which in the UK carries massive fines.
I have switched over from Quickbooks and in this system you can manually enter the final VAT amount if not correctly rounded according to the suppliers VAT calculation - Surely it is a pretty simple thing to allow the ability to manually enter the VAT total thereby keeping VAT records straight and being able to enter a correct invoice without breaking laws?
I will add my name to the long list of paying users asking for an upgrade: please provide an option to add Tax per line items OR per total. That will allow everyone an option that works. I do not need to talk to an accountant. Wave should know that in Canada as per CRA "If your customer is buying more than one item and tax applies at the same rate on all items, you may total the prices of all taxable goods and services, calculate the GST/HST payable, and then round off the amount." FYI- Formally asking us to manually edit bill amounts incorrectly could make WAVE liable in should an audit occur.
Hi there,
I have to insist that there needs to be a way to manually override tax calculations. There are numerous systems for how taxes are calculated, and it would be nearly-impossible to account for them all; overriding, while less convenient, would ensure that no one ever has to fudge numbers to make it work.
However, locking everyone into the line-by-line calculation makes it difficult to use Wave--it results in us overcharging, technically. In Florida, we are directed to calculate based on the total amount of the sale, per the Department of Revenue (See PDF).
Adjusting using a line item causes the disparity to get worse, as it lowers the Subtotal while leaving the tax calculation inflated. Though minor, it would appear that I over-charged even more.
This needs to be more of a priority; while most Wave customers probably aren't large enough to worry about class actions (and I doubt anyone is going to court over $0.01), it does technically put us at risk, and at best makes us look bad in the eyes of customers.
I'm also adding my name to the long list of users. Quebec, Canada here. Need tax calculated on total, not single items.
Crazy that after 3 full years, Wave asks us for a workaround for such an important/serious per the law topic.... Seriously, what's on your priotization list then ?!
Adding my name to the ever growing list of Canadian paying users asking for this fix. Asking us to workaround what is a foundational need for an accounting application is not a solution.
Adding my name as I am beyond pissed off that because of this I got in trouble with the CRA!!! You can't overcharge taxes to a customer in Canada. It's the law!! Fuck sakes, a customer complained to the CRA that I been over charging them taxes by cents. Well I got examined and almost every single one of my invoices done with you had an over or under charge for tax. I F'ing got fined because of your shity software programming!!! I'm going to use your system for my accounting but I'm going over to Square for invoicing now. I may honestly move myself completely to a different accounting software and stop referring you because of this.