Tax calculations...

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Wed Apr 11, 2012 11:29 pm

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Tax calculations...

Hi again,

Sorry to bother you with this but I'm having to deal with some calculations that seem to be relevant to accounting principles. Here's the challenge: I'm using the VAT exec mode, and when I have a product and apply a tax rate to it, it comes out with a half a cent calculation and if only one item is ordered, the correct tax is applied because the calculation tends to round down. If I have two items of the same cost and a tax applied, the two "half cents" add up to another cents' worth of cost. Problem is that from what I'm understanding, tax practices should be based on line-by-line calculations and so the total amounts would lose that extra cent. In other words the product costs should not be subtotaled and tax applied to that subtotal, but that each line item (product) should have the tax applied to that product and the tax rounded down before applying. Each line item will have the same amount as before, but the total tax will have a "rounded down" summary. Am I making sense?

Here's an example: Two products each at $29 apiece. Tax rate is 8.25%

Product 1 shows up in the cart as $29, and adding Product 2 makes the subtotal of the two products to be $58. If you apply the 8.25% rate to the subtotal, the tax comes out to be $4.785, which, by normal rounding guidelines, turns out to be $4.79. Accounting and tax principles say that you should tax each item separately: take Product 1 at $29, and at 8.25% tax, the tax rate for that product is $2.3925 which rounds to $2.39. Product 2's calculation comes out to be the same, $2.39. So the total tax is $2.39 + $2.39 or $4.78, not $4.79.

I know this is probably a pain, but I've already had a challenge to the 1-cent math in the shop calculations by a very analytical customer...any thoughts about doing a line-by-line tax calculation approach vs. subtotals?

Site Admin
Mon Apr 16, 2012 9:53 am

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Re: Tax calculations...

hii did some changes to shop.. can you update a...

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