How does Quickbooks calculate VAT on invoices with a percentage discount

Hi Thunderbolt, thanks for joining the Community.

In QuickBooks Online, the discount is applied to the overall invoice and the VAT is then calculated (and rounded to 2 d.p.) on each line item separately, then added together. If you'd like, you can reply below with an attachment of the invoice (covering any sensitive info) so we can provide a further breakdown on the calculation for you. 

Thank you for the reply.

I'd appreciate the detailed - I'm using the API to build an app to connect our systems directly to QB and we offer 2% 10 Net 30, and we thus want to state the value of the invoice with the 2% discount applied in the Customer Memo (see attached screenshot) without actually applying the 2% to the invoice. Then if people pay within the 10 days they pay the 2% value and we match it off in QB..

As such, I am trying to programmatically calculate the 2% value to put in the customer memo but I am a programmer not an accountant. So I need to understand the order that this is calculated and rounded.

Currently I do:

For each line item:

$subLineTotal += ($invoiceLineAllRetailers['ItemRate'] * $invoiceLineAllRetailers['ItemQuantity']);
$subLineTotalDiscountTax += round(($invoiceLineAllRetailers['ItemRate'] * 0.98 ) * $invoiceLineAllRetailers['ItemQuantity'] * 0.2,2);

Then once complete:

$discount = round(($subLineTotal * 0.02),2);

$total = $subLineTotal + $subLineTotalDiscountTax - $discount;

But on some invoices I'm a penny out.. 

See attached invoice from our sandbox

Thanks

I'm sharing some information that could help you get through this.

QuickBooks automatically calculates the total tax rate for each sale based on the following:

• Your customer's tax-exempt status
• Where you sell and where you ship
• What you sell

Refer to this article for detailed information: Learn how QuickBooks Online calculates VAT.

On the other hand, since you're using API, for you to be guided more on the VAT calculation, I recommend contacting our Intuit Developer. Where you can get an answer from one of the experts, like API, developments, and other related concerns, they can provide details and ideas on the best process you can take.

Here's how you can reach out to them:

1. Go to https://help.developer.intuit.com/s/.
2. Choose QuickBooks Online under What do you need help with?
3. Click Ask a Question.
4. Log into your existing Intuit Developer Account or create a new one.
5. Enter your concern.
6. Tick Ask.

You can also visit this article for future reference: VAT Exceptions and Reports in QuickBooks Online.

Feel free to post here again if you have further QuickBooks-related concerns. We are available 24/7 to lend a hand with each of your queries. Stay safe!

Thanks for this response but I think I'll wait for the first employee's reply to break down the actual calculation. This is what I need and an explained example based n the provided attachment on my previous response will be very helpful. The linked articles don't explain how VAT is calculated despite the title.. 

I have used the ask support and they were of no help as it is not an API issue - This behavior happens in the UI of Quickbooks Online.

Thanks

I too am having this problem. According to the HMRC website VAT is charged on the discounted total that is charged to the customer.

So why is QB charging VAT on the  original amount and not on the Discounted amount. Very embarrassing when the customer has to pull you up on it. So what's happening to us:

Net Charge              39.00

10% Discount         -  3.90

Sub Tot                    35.10    VAT should be 7.02  Giving a total of 42.12

VAT                            7.80    VAT has been charged on the NET amount of 39.00

TOTAL                     42.90     VAT on the NET has been added to the S/T = 42.90

VAT Summary shows Net = 35.10 But the VAT charged as being 7.80 instead of 7.02

How can this be fixed please 

Regards

Alan

Let's correct the VAT calculations on your invoices, Noko.

If you've added the 10% discount (3.90) as a separate line item, ensure to include it when selecting the VAT. Doing so will result in a VAT of 7.02 and a total amount of 42.12. I'll add a screenshot below for your reference.

Alternatively, you may enter the discount directly as a percentage or value under the Subtotal section.


I've added this resource to guide you in personalizing your sales forms: Customise invoices, estimates, and sales receipts in QuickBooks.
 

Feel free to click the Reply button if you have further questions.

Hi,

The discount was applied in the subtotal section.

Since posting I checked all the invoices for last month (May), there was 2 invoices which were calculated incorrectly.

I also checked the previous month (April), there was 3 invoices which were calculated incorrectly.

I further examined each incorrect invoice and edited them. I noticed that if I choose to enter the discount as £ sum rather than a %. The invoice was corrected.

As this only affected a few invoices, I would suggest that it may be a bug in the program

Regards

Noko