Learn how to set taxes up in Dutchie E-Commerce to support out-the-door pricing also known as tax-inclusive pricing.
Dutchie E-Commerce admins can set their taxes up to support “out-the-door” (or “tax-inclusive”) pricing so that prices listed on their menu include all taxes and reflect the final price the customer pays at checkout.
Note: If you're integrated with Dutchie POS and have enabled Discount Sync, taxes and fees shown in carts and applied at checkout are based on Dutchie POS settings. Learn more.
Table of contents
- Calculating pre-tax price and out-the-door price
- Rounding
- Out-the-door pricing and percentage discounts
- Fractional cents
- Online settings for tax rates
Calculating pre-tax price and out-the-door price
The simplest formula for calculating a product’s pre-tax price based on its out-the-door price is:
[out-the-door price] / (1 + [total tax expressed as a decimal])
For example, a product with a $12.00 out-the-door price with 20% total tax has a pre-tax price of $10.00:
$12.00 / 1.2 = $10.00
Another way to think of this is that it’s the reverse of the calculation you would use to find the out-the-door price based on the pre-tax price, which is to multiply the pre-tax price by 1.2 (or 120%):
$10.00 x 1.2 = $12.00
Or, to break it down further:
$10.00 pre-tax x 0.2 tax rate = $2.00 tax
$10.00 pre-tax + $2.00 tax = $12.00 out-the-door
Rounding
In the above example, the math works out nicely to whole cents. This won’t always be the case, however. Consider an item with a $5.00 out-the-door price that includes 10% tax:
5.00 / (1 + 0.10) = 4.5454545…
Because we can’t charge customers or remit taxes in fractions of cents, this amount is rounded to the nearest cent, or $4.55. If the third decimal place is a 5 or greater, we round up. If the third decimal place is a 4 or less, we round down.
Out-the-door pricing and percentage discounts
Now let’s look at a more complex real-world example involving discounts.
A product’s out-the-door price is $35.00 with a 7.9% sales tax and 37% cannabis tax, or 44.9% total tax.
Its pre-tax price calculates to:
$35.00 / 1.449 = 24.154
Now let's apply a 30% discount to this item with the three different Discount Application settings you can choose in your Dutchie E-Commerce tax configurations.
Both
Discounts and taxes are both calculated on the pre-tax price:
24.154 x 0.3 = 7.246 discount
24.154 x .079 = 1.908 sales tax
24.154 x .37 = 8.937 cannabis tax
24.154 - 7.246 + 1.908 + 8.937 = 27.753, which rounds down to $27.75 out-the-door price.
Taxes first
Taxes are calculated on the pre-tax price, then discounts are calculated on the post-tax price:
24.154 x .079 = 1.908 sales tax
24.154 x .37 = 8.937 cannabis tax
24.154 + 1.908 + 8.937 = 35.00 with tax
35.00 x 0.3 = 10.50 discount
35.00 - 10.50 = $24.50 out-the-door price
Discounts first
Discounts are calculated on the pre-tax price, then tax is calculated on the discounted price:
24.154 x 0.3 = 7.246 discount
24.154 - 7.246 = 16.908 pre-tax discounted price
16.908 x .079 = 1.336 sales tax
16.908 x .37 = 6.256 cannabis tax
16.908 + 1.336 + 6.256 = $24.50 out-the-door price
Note how the taxes-first and discounts-first methods both result in the same out-the-door price, but with different tax and discount amounts.
Fractional cents
The above examples mostly involve more than two decimal points – that is, fractions of cents.
Depending on pre-tax prices, tax rates, discount percentages, and different rounding logic used by different POS platforms, depending on how and at what point in the calculation the POS does the rounding there may be a one- or two-cent difference between the total the customer sees on their Dutchie E-Commerce order summary and the total in the point of sale.
For example, 16.908 + 1.336 + 6.256 adds up to exactly $24.50. But if we round these amounts to whole cents before adding them up, we get:
16.91 + 1.34 + 6.26 = 24.51
Online settings for tax rates
Each tax rate configured in Dutchie POS has an online settings section that controls how taxes are shown on Dutchie E-Commerce. Learn more about online tax settings and make sure your taxes are configured to appear online the way you want them to.