Default Tax Setting
By default, the system applies "no tax" to surcharges and tips. This means that unless you change the setting, taxes will not be calculated on these amounts.
Adjusting Tax Settings
Depending on the tax laws in your country, you may need to apply tax to surcharges and tips. To adjust this:
Go to your tax settings.
Select the appropriate tax rate from the list you’ve already set up.
Choose whether the rate should be inclusive (tax is built into the price) or exclusive (tax is added on top).
Make sure the selected setting matches your local tax requirements.
Country-Specific Tax Rules
Here are some examples of how different countries handle taxes on surcharges and tips:
Canada: As of March 2023, the Canada Revenue Agency (CRA) clarified that credit card surcharges, when charged separately and disclosed to the customer, are considered a separate supply of a financial service and are exempt from GST/HST. Learn more
United States:
Michigan: The Michigan Department of Treasury considers credit card surcharges as part of the taxable sales price, making them subject to the state's 6% sales tax.
Wisconsin: If the underlying product or service is taxable, surcharges must be included in the sales tax calculation. Learn more
Japan: The standard consumption tax rate is 10%. Fees paid through settlement agents are generally subject to consumption tax. Learn more
European Union: Businesses are prohibited from extra fees for credit or debit card payments, meaning taxes and any related costs must already be included in the advertised price. Learn more
Key Takeaways
Always check local tax laws to understand how surcharges and tips should be taxed.
Update your system’s tax settings to stay compliant.
When unsure, consult a local tax professional.
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