Withholding & Releasing Tax

Purpose

This feature empowers service providers, particularly those operating marketplace platforms, to manage and remit sales tax efficiently. It simplifies the complexities associated with tax collection by automating the withholding process directly within transactions.

How It Works

The tax withholding and releasing functionality is integrated into our Transaction API and E-check services via the Sale and Capture requests.

This integration introduces 3 new parameters: taxWithHold , taxWithHoldRelease, and taxAmountRelease, which enable service providers to manage tax withholding effectively.

Parameters:

Capture or Sale Operations

• taxWithHold: Set this to true to activate tax withholding for a transaction. When enabled, the specified tax amount entered in the taxAmount parameter is withheld from the merchant’s payout and is passed on to the service provider for remittance.

Refund Operations

• taxWithHoldRelease: Used during refunds, setting this parameter to true indicates that the withheld tax amount should be released back to the merchant, aligning with the refund amount issued.
• taxAmountRelease: The amount of withheld tax that needs to be released back to the merchant for an associated transaction.

Practical Example

Let’s illustrate this with a typical $100 transaction:

Transaction Details:

Transaction Flow:

1. Initial Purchase:
   • A customer purchases an item for $100, which includes a $10 tax component.
2. Fee Distribution:
   • The total $5 fee is divided equally, with $2.50 going to both Jupico and the facilitator.
3. Tax Handling:
   • With taxWithHold set to true, the $10 designated for tax is withheld by Jupico.
4. Payout Allocation:
   • Facilitator: Receives $2.50 as their processing fee.
   • Product (Service Provider): Retains $12.50, comprising $2.50 as their share of the fees and $10 from the withheld tax.
   • Sub-Merchant: Receives $85, after the deduction of fees and tax.

Summary

The tax withholding and release feature ensures that service providers can fulfill their tax obligations without burdening merchants with the complexities of tax remittance. This feature is particularly beneficial for marketplaces that are legally mandated to collect and remit sales taxes on behalf of their merchants.

By automating tax collection and remittance, Jupico aids in compliance with state tax regulations, simplifying financial operations for service providers and ensuring accuracy in tax handling.