Loop + AvaTax
Loop is configured to properly account for taxes in Shopify's native tax reporting. However, if you're managing tax reporting in AvaTax, its possible the loop-discount applied to Loop exchange orders does not properly allow AvaTax to account for taxes on those exchanges.
Taxes + Loop Discount (Default)
By default, processing a Loop exchange order will:
- Mark the item on the original order as returned, subtracting the taxes associated with that product in both Shopify tax reporting + AvaTax
- Create a new exchange order, with the value of the product discounted down to $0 with a loop-discount code (or discounted to the price of the upsell associated with the product for Shop Now upsell orders)
- Add tax lines to the exchange order, leveraging your Shopify tax settings, that ensure Shopify's native tax reporting calculates the appropriate tax value.
Exchange order example, with loop-discount:
Loop-Discount: Shopify Reporting Impact
Loop-discount has the following benefits in Shopify Reporting that need to be accounted for when disabled:
- no impact on Net/Gross Sales
- no impact on Payments
Please note, by default, loop-discount will Inflate discounts in Shopify (use existing reconciliation information here)
AvaTax Reporting + Loop's Solution
AvaTax's reporting does not leverage Shopify Tax lines. AvaTax will look at the subtotal, after discounts are applied, and use that value to set tax values within their system. To solve for this, Loop recommends disabling loop-discount and creating the exchange order at full value.
Exchange order example, loop-discount removed:
Removing Loop-Discount: Shopify Reporting Impact
Removing the Loop discount will impact the following in Shopify Reporting:
- Net sales/gross sales is inflated
- Discounts are not inflated
- No impact on payments
Loop recommends leveraging the Exchange report to differentiate upsell/downsell from even exchange value
Please reach out to firstname.lastname@example.org or your Onboarding/Account Manager, if you'd like to disable loop-discount.
I need to properly account for taxes in AvaTax reporting, but am using loop-discount for other reconciliation processes, what should I do?
We understand that loop-discount may be important for other accounting processes, reach out to email@example.com or your Onboarding/Account Manager and they will assist you in building a reconciliation process that meets your needs.