FAQ: Vendor Reimbursed Discounts
Discount Plans can be designated as vendor reimbursed when a vendor is paying you back for discounts you offer on that vendor's products, and where your local tax code considers this reimbursement to be revenue subject to sales tax.
This setting is used in very rare circumstances. If you select this for a discount is not vendor reimbursed, you will artificially inflate sales data on your Monthly Tax Report, making it look like you owe more taxes than you collected. If you're unsure whether this setting is appropriate for your particular discount, consult an accountant or tax professional.
How are Vendor Reimbursed Discounts calculated?
When you select Vendor Reimbursed Discount, the tax amount applied to a discounted item will be calculated based on the pre-discount price.
Here's an example: If a customer purchases a $5.00 item ($4.17 base price + $0.83 tax):
Vendor reimbursed discount of $1.00: Greenbits reduces the base price to $3.17 but the amount allocated to tax will stay at $0.83.
Regular discount of $1.00: Greenbits reduces the final price and recalculates the base price and tax ($3.33 base price + $0.67 tax).
How do Vendor Reimbursed Discounts show up in reports?
Most reports do not include Vendor Reimbursed Discounts in the discount total.
The Sales Report does includes Vendor Reimbursed Discounts in the discount total. This is designed for accounting purposes where you consider reimbursement a different source of revenue than sales revenue.
Why does it look like I over-collected taxes?
If you are calculating the tax percentage off of the Net Sales totals after discounts in the Sales Report, it will appear like you over-collected taxes, when you didn't. This is because the Sales Report includes Vendor Reimbursed Discounts in the discount total, but Vendor Reimbursed Discounts are subject to taxes.