How Promo Codes and Account Credit Work

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Issue:

Promo Codes and Account Credit are not the same. This article walks through the difference and shares examples of how each one works with different scenarios.

Solution:

When placing an order, promo codes and account credit may seem similar, but they work in very different ways.

• Account credit is a form of payment, like a gift card or cash.
• Promo codes are discounts that reduce the price of an order.

This difference impacts how taxes are calculated and what your buyers pay at checkout.

Simple rule:

• Promo codes reduce your total before tax is calculated
• Account credit is applied after tax is calculated

Why this matters:

• Promo codes can lower the taxable amount
• Account credit does not reduce tax, because it does not change the item price

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Promo Code Cart Examples
Let’s work through some example cart scenarios using promo codes.

How They Apply
Promo codes reduce your total before tax is calculated.

Example 1: Promo Code Partially Covers Order
The user is using a promo code for $50 off and the subtotal and shipping is more than the promo code amount. The promo code will apply to both the subtotal and shipping. Tax will be applied after the discounted total. The buyer is responsible for paying the discounted total + tax.
Subtotal $90.00
Shipping $15.00
Promo Code ($50 off)
----
Discounted Total $55.00
Taxes (8.25%) $4.54
----
Order Total $59.54

Example 2: Promo Code Fully Covers Order
The user is using a promo code for $50 off and the subtotal and shipping is equal or less than the promo code amount. The promo code will apply to both the subtotal and shipping. Since the promo code covers the subtotal and shipping, there is no tax applied. The buyer does not need to pay anything.

Subtotal $30.00
Shipping $15.00
Promo Code ($50 off)

----
Discounted Total $0.00
Taxes $0.00
----
Order Total $0.00

Example 3: 100% Off Items, Shipping Still Applies
The user is using a promo code for 100% off. The promo code will apply to the subtotal but not shipping. Tax is applied to shipping. The buyer will need pay for the taxed shipping charge in this case.

Subtotal $90.00
Discount (100%)
Shipping $15.00
Taxes (8.25%) $1.24
----
Order Total $16.24

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Account Credit Cart Examples
Here are some cart scenario examples using account credit.

How It Applies
Account credit is applied after tax is calculated and acts as a payment toward the total.

Example 4: Credit Does Not Cover Full Order
The user is using account credits and the subtotal and shipping is more than the account credits they have. Tax is applied to the subtotal and shipping. The account credits will cover subtotal, shipping, and taxes, but the buyer will need pay for the remaining amount since their accounts credits is less than the total.

Subtotal $90.00
Shipping $15.00
Taxes (8.25%) $8.66
----
Order Total $113.66
Account Credit $100.00
Amount Due $13.66

Example 5: Credit Covers Entire Order
The user is using account credits and the subtotal and shipping is less than the account credits they have. Tax is applied to the subtotal and shipping. The account credits will cover subtotal, shipping, and taxes, and the buyer does not need to pay anything.

Subtotal $75.00
Shipping $15.00
Taxes (8.25%) $7.43
----
Order Total $97.43
Account Credit $97.43
Amount Due $0.00

Example 6: Credit Equals Subtotal Only
If account credit is the exact amount of the sub-total, it covers the item cost, but not the shipping or tax.

Subtotal $75.00
Shipping $15.00
Taxes (8.25%) $7.43
----
Order Total $97.43
Account Credit $75.00
Amount Due $22.43

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Key Differences

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