Square Online - Zero Rated VAT items

[treetops]

We have set up for item level tax rates, and have chargeable shipping options, when a zero rated VAT item is purchased Square is correctly applying our 20% order level tax rate to the shipping, but is also then showing in the VAT calculation at the basket an amount of VAT which includes 20% VAT on the item itself, (despite the item being 0% zero rated).

The basket total is correct, it is just not showing the correct amount of VAT, and we do not want 20% VAT showing on our tax reports for zero rated items, as we would then have to send too much VAT to the government!

If we change the basket to pickup it does not do this, so it only seems to happen when square is calculating delivery, somehow it seems to override the item level tax rate we have set on the item (zero rated), and calculates 20% VAT on the whole order using the order level tax rate.

We have also noticed it's doing the same thing for Standard VAT items, if set for pickup it uses our item level tax rates (as set in Square Dashboard - essentially the POS rates), BUT if we then set the item for shipping, in the basket the text lable changes for the VAT being applied from the item level VAT rates we have to the order level VAT rate.

For a basket containing just 20% VAT items that would actually be fine, but we have a lot of zero rated items, so we do not want the order level 20% VAT rate being applied across all the items just becasue we have selected the shipping option.

We have been through the guides so many times and cannot work out why the addition of shipping seems to be overriding our item level tax rates!!

[Breffni]

Hi @treetops. thanks for flagging this and sorry to hear that you're having some trouble. 

Some of this does sound off, but it's difficult to pinpoint what may be happening without looking at your account with you.

The fastest way to resolve complicated Square Online questions is by reaching out to our support team directly. The best way to reach out is by phone because our team can look at your account with you and help you make adjustments in real time.

If you haven't already, please give us a call on  0800 - 098 8008, 9AM- 5PM, Mon-Fri.

[treetops]

Hi,

Thanks for the reply, for the benefit of others that may see this, I have spoken with your support team who were very helpful, and they confirmed something is indeed 'off'.

In short (ish), Square Online does not recognise/handle zero rated items where shipping tax is applied, even if item level tax rates are correctly set, this causes a serious problem at checkout where an order level tax rate is applied to a delivery fee (as required by UK law), when the order level tax rate is applied and an item in the basket is zero rated it calculates the order level tax rate to both the delivery fee AND the zero rated item, so displays the incorrect amount of tax.

We sell zero rated children's clothing amongst full 20% rated items, so it's a big issue for us.

Our tax is included in item prices so the final total is actually still correct, but there are two consequences;

1. customer sees an amount of VAT that is incorrect (as the zero rated items should not have VAT accounted for at all)

2. the tax report is incorrect, resulting in us potentially then having to send too much VAT to HMRC

A feature request has been raised, as the support team recognised this is a significant oversight, as the system is in effect not in compliance with UK tax legislation.

Our current workaround is awful but we have no choice, we have set the zero rated items to 'non-taxable', which at least removes them from any VAT calculations at checkout, and keeps them off the tax reports, but again this is not really compliant with UK tax rules as they are counted for taxable turnover, just at 0%, but we will just have to run manual reports and adjust to ensure we account correctly.

We are hoping this is resolved promptly...