As the go-to sales tax guys on Clover, DAVO has many restaurants asking us how to use the DAVO SALES TAX APP with 3rd Party Ordering Apps (3POA) such as GrubHub and EAT24 on their Clover Systems. Since the orders from these 3POAs are received on a separate device, usually outside of Clover and the sales income gets deposited directly into the merchant’s bank account, Clover has no record of these sales. This can set up a potentially huge sales tax liability for the merchant if these sales are not reported or create a tremendous amount of bookkeeping work to report accurately. There is a simple solution in Clover.
The simple solution to this problem is to record the 3POA sales in the merchants POS on a daily basis. (As sales tax professionals, we recommend daily recording as a best business practice.) However, there is a bit of nuance to this simple solution depending on where the restaurant is located. In most states it is the merchant’s responsibility to collect, file and pay sales tax on 3POA orders. But in 5 states, Florida, Georgia, Michigan, Utah and Virginia the 3POA is required to collect, file and pay the sales tax on the merchant’s behalf. Both scenarios require action by the merchant.
In the 5 states where the 3POA pay the State DOR on the merchant’s behalf, the 3POA pays the sales tax directly to the state, unless the merchant specifically signs a waiver saying they will pay it themselves, in which case the sales tax is returned to the merchant for payment. Even though the 3POA pays the sales tax, this does not get the merchant completely off the hook because the sales are still not recorded in Clover. Having accurate sales records means Clover sales should reconcile or balance with the merchant’s bank account. But if sales from 3POAs are going directly into the merchant’s bank account, they are not being recorded in Clover and this creates a reconciliation problem. To rectify this, the merchant needs to enter their 3POA sales into CLOVER. To do this, they simply create an ORDER TYPE (ITEM) called “3rd Party Orders” with an OPEN PRICE function and make it a non-taxable item. At the end of each day, they enter the TOTAL NET SALES (gross sales minus sales tax) from all 3POAs they are using, as one “non-taxable” sale into CLOVER. The “Total Net Sales” is readily available on the 3POA merchant dashboard. Entering this amount will ensure the 3POA sales are accurately recorded in Clover and reported to the state when DAVO files on the merchant’s behalf. In the event of a Sales Tax Audit, the merchant’s sales records from CLOVER will match their bank account records.
For all other states where 3POA do not file sales tax on the merchant’s behalf, it is the merchant’s responsibility to pay the sales tax on 3POA sales. Again, the 3POA sales need to be entered or recorded in Clover, but this time as taxable sales. To account for theses sales, the merchant again creates an ORDER TYPE (ITEM) called “3rd Party Orders” in CLOVER with an OPEN PRICE function. At the end of each day, they enter their GROSS TOTAL SALES from all the 3POAs they are using. The total can again be found on the 3POA merchant dashboard. Once entered, Clover will calculate the sales tax on the total 3POA sales, making them part of the total daily taxable sales reported to DAVO as part of the Payments Report from Clover. DAVO will automatically set aside the correct amount of sales tax collected for payment to the state. Make sure that delivery charges are entered as either taxable or non-taxable depending on the laws of the taxing jurisdiction.
By entering the net or gross total sales into CLOVER every day, the merchant is making Clover the accurate record of their total sales which will balance with their bank statements. Additionally, DAVO will have an accurate record of the merchant’s total monthly sales including what was sold outside the Clover system via the 3POA. This will enable DAVO to accurately collect, file and pay the sales tax on the merchant’s behalf.
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