Tax calculation

Tax calculation

Why Tax and Discount Totals May Differ for Grouped vs. Line Items

Taxes are calculated on an item level, which can result in minor discrepancies in totals depending on how items are grouped or processed individually.

Tax Calculation Example:

  • Two identical items at $1.79 each with a tax rate of 10.250%:
    • Tax for each item: $1.79 × 10.250% = $0.1837475 → Rounded to $0.18.
    • Total Tax for 2 items: $0.18 × 2 = $0.37.
  • Two different items at $1.79 each with a tax rate of 10.250%:
    • Tax for the first item: $0.18.
    • Tax for the second item: $0.18.
    • Total Tax: $0.36.

This difference arises because taxes are calculated and rounded at the item level rather than grouping the items first.

Line Item vs. Grouped Items:

When calculating discounts and taxes, the process is slightly different for individual line items and grouped totals.

Line Item Calculation:

  1. Price: Rounded to 2 decimals.
  2. Quantity: Rounded to 4 decimals.
  3. Subtotal: Price × Quantity (rounded to 2 decimals).
  4. Discount: Applied to the subtotal (rounded to 2 decimals).
  5. Taxes: Calculated on the discounted subtotal (Subtotal - Discount), rounded to 4 decimals.

Order Totals Calculation:

  1. Subtotal: Sum of all item subtotals (rounded to 2 decimals).
  2. Discounts: Sum of all item discounts (rounded to 2 decimals).
  3. Taxes: Sum of all item taxes (rounded to 2 decimals).
  4. Total: Subtotal - Discounts + Taxes ± Other values (rounded to 2 decimals).

Example Case:

Line Item Calculation:

  • Price: $8.15.
  • Quantity: 3.
  • Subtotal: $8.15 × 3 = $24.45.
  • Discounts: $0.
  • Taxes: $24.45 × 10% = $2.445 (rounded to $2.45).

Order Totals Calculation:

  • Subtotal: $24.45.
  • Discounts: $0.
  • Taxes: $2.45.
  • Total: $24.45 - $0 + $2.45 = $26.90.

By breaking down the calculations, we can see why minor differences may appear in grouped vs. line-item scenarios. These differences are a result of rounding at various stages of the calculation process.


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