How to handle Square transaction fees & tax

Heli2

I'm new to charging HST and trying to figure out how to properly account for the tax collected and owing on sales that were subject to transaction fees. Since the deposits don't include the transaction fees, how do I a) account for the fees properly, and b) calculate the correct tax amount collected without manually overriding each transaction?

ConnorM

Hey @Heli2!

Wave doesn't automatically account for taxes in Square's fees. Since you're in a region where Square charges tax on the processing fee, you'll need to add this manually using a Journal Transaction. To open this function, click on More > Add journal transaction in the upper right-hand corner of the Transactions page.

If the tax you're recording is recoverable, the Journal Transaction should look like this:

Dr Sales Tax Paid Account for the amount of the tax
Cr Payments by Wave clearing account for the amount of the tax

If the tax is not recoverable, the Journal Transaction should look like this:

Dr Merchant/Square Fee Account for the amount of the tax
Cr Payments by Wave clearing account for the amount of the tax

Then, if you have your bank account set to automatically import to Wave, make sure to categorize the incoming deposit as a transfer from the Payments by Wave account.

One last thing to note - if the tax you're paying is recoverable, make sure to add this detail to the notes of the Journal Transaction for your records. You'll also want to use the account transactions report for this Sales Tax, found by going to Reports > Account Transactions report, when filing. Because this tax has been entered manually using a Journal Transaction, it won't appear on the Sales Tax report as other transactions do.

I hope this helps to guide you, and clarifies how to keep track of tax on fees for your Wave account.