The amount payable for orders placed on the Faire platform may be reduced by promotions that could be offered by brands or by Faire. The application of these promotions may impact the value-added tax (VAT) or the goods and services tax (GST) payable.
There are two types of promotions on Faire.
- Brand funded promotions are offered by a brand to a retailer making a purchase
- Faire funded promotions are offered by Faire to a retailer making a purchase
The calculation of the VAT or GST applicable to the order will vary depending on the type of promotion applied to the order.
Brand funded promotions
Where an order is reduced by the application of a brand funded promotion any VAT or GST due is calculated on the order subtotal after the promotion has been applied. For example, if a retailer places an order for $100 and a $20 promotion has been applied to the order by the brand, the VAT or GST due on the transaction is calculated by multiplying the applicable VAT rate by $80 ($100 less the $20 discount). As a result, the order total would be calculated as follows.
$80 + [VAT or GST rate * $80]
Faire funded promotions
There may also be times when an order is reduced by the application of a Faire funded promotion. When a promotion is funded by Faire, it does not reduce the taxable value of an order or the taxable value of the individual products. Faire funded promotions act like a credit offered to the retailer's payment of the order.
In these scenarios, Faire is covering a part of the retailer’s cost by agreeing to make a payment directly to the brand on the retailer’s behalf. VAT or GST is due on the total amount received by a brand. Therefore, the VAT or GST will still be calculated on the order subtotal before the Faire funded promotion. In the above scenario, if a retailer places an order for $100 and a $20 Faire-funded promotion is applied to the order, the order invoice will show the following.
$80 + [VAT rate * $100]
Brand funded and Faire funded promotions
In certain circumstances, there may be both brand and Faire funded promotions on the same order invoice. In that scenario, the brand funded promotion is applied first and the VAT or GST due is calculated by applying the appropriate VAT or GST rate to that reduced amount. The Faire funded promotion is then applied to the balance and only decreases the total payable amount for the retailer, as stated on the order invoice.
Taking an example, using a VAT rate of 20% and where the transaction is for $100, and both a brand funded promotion of $10 and a Faire-funded promotion of $20 are applied, the order invoice would show an amount due of $88, calculated as follows.
Order subtotal: $100
Less: Brand funded promotion ($10)
Taxable value: $90
VAT at 20%: $18
New subtotal: $108
Less: Faire funded promotion ($20)
Total amount payable: $88