Question about credit card processing fees

[bobfjt]

Hello,

I have a question about how to use credit card processing fee. I set up the 2.6% and $0.10 fees followed the Square Instruction as Service Charge. But I fond that they don't add the Sales Tax to the amount to calculate.

Fore example, I sell an item which is $100. The sales tax is 8.875% ($8.87), the total amount is $100 + $8.87 = $108.87.  When the customer uses credit card to pay it, I have to charge the 2.6% + $0.10 credit card processing fee, which is $108.87 x 2.6% + $0.10 = $2.93. 

But when I use my cellphone app to charge it, the credit card processing fee shows as $2.60 + $0.10 = $2.70, not $2.93. It seems that it doesn't calculate the sales tax amount.

My question is: how can I set up the credit card processing fees which do calculate the amount including the sales tax?

Thanks in advance.

Bob 

[Donnie-M]

@bobfjt What you are seeing is the .10c gets infinitely smaller as the price of the item/ticket goes up.  I want to caution you, what you really want to be doing is charging a service charge that is not directly linked to credit card charges.  The main reason is you can't do this if someone uses a debit card.  It is in fact a violation of Federal Law to charge a surcharge on debit cards.  The best way to figure out what kind of service charge to charge the customer is to look at your end of day report and it will show you your "Effective Fee" percentage and match that.  Or do something like 3.5% or 3%.

I can tell you this without a doubt, trying to recover every penny on processing fees is a loss leader for your business.  You are much better off working on increasing sales than cutting costs on pennies.  Pennies matter, but not these.

"

 "If you wish to apply a credit card surcharge, you will first need to notify the card networks as well as follow their surcharging rules. Find out more about notifying Visa and Mastercard of your surcharging plans.

You can use our surcharge calculator to easily calculate the amount to charge customers in order to cover transaction fees. Learn more about applying a surcharge with Square.

Note: Surcharging is not permitted on debit or prepaid cards or Afterpay"

I would recommend a "cash discount" if you are really trying to cut the cost.  Just set your prices to reflect what you need to charge for the item using the surcharge calculator and charge that.

What you are trying to do is is recoup the square fee on the taxes which is equivalent to 0.234%.  Less than one quarter of one percent if you have a 9% sales tax rate.