How to collect monthly installment payments in simple round amounts

[mikesclub]

I allow my customers to make monthly installment payments on some purchases. The total price includes sales tax. But I’m having a problem because, each time they come in to make a payment, Square adds the sales tax to that monthly payment. 

For example: purchase price is $100. Add sales tax (10%) and you get a total due of $110. 

We agree that the customer can make monthly $20 payments, with a final payment for the remaining balance. 

But when I ring up the $20 payment, Square adds 10% sales tax. 

if I turn off the tax for that transaction, Square doesn’t record it as a taxable sale. (I report my taxable sales based on the Square sales report). I do eventually collect the entire amount plus tax ($110) but there wouldn’t be any record of a taxable $100 sale. 

If I ring up the $20 and then deduct the $2 that Square added for tax, then I think I’m getting shortchanged, because Square will still record part of that $20 as tax, won’t it? 

Essentially, what I want to do is collect the monthly installment payment in simple round amounts (like $10, $20, etc) like you do in any other installment purchase plan, but have the collection treated as taxable income (which I will collect tax on in the end).

Am I overthinking this? Does anyone have any ideas or suggestions?

[sayra]

Hello, @mikesclub. 

Can you please provide us with more details on how you have this set up to record the transactions? Are you using the POS when this transaction is recorded or are you using Square Invoices?  

We will be on the lookout for your response. 

Thank you. 

[mikesclub]

Sorry for my late reply. 

I am not using invoice. 

The process works like this:

The customer walks into my physical store and buys a $100 item. 

We fill out a paper payment agreement that records the total amount due as $110 ($100 + 10% sales tax). The agreement also records the payment schedule (when they will make payments and how much they will pay each time). 

In most cases, the customer wants to pay a round number each month (like $10 or $20 per month). This is how I normally see layaway agreements in other stores. 

Up to this point, there is no transaction via my POS. Just a paper agreement with future payments scheduled. 

Now comes the problem: when the customer comes in next month to make the first $10 payment, how do I charge it on Square? If I run the transaction for $10, Square automatically adds the sales tax, making the new amount due $11. That’s not what the customer agreed to pay each month. 

If I turn off the sales tax for that transaction, then my taxable sales report will be wrong. 

If I give a $1 discount, to drop the amount due back down to exactly $10, my taxable sales report will still be wrong (I think). 

All I want to do is let my customers make installment payments in simple round number amounts, but still make sure I collect and remit the proper sales tax, without having to use weird workarounds. 

I record the monthly payments on the paper agreement the customer signed. 

Does Square offer any other function that might work with installment payments?