How Do Tax Rules Apply to Manual Credits in Recurly?

Tax Applicability for Manual Credits

Tax processing is typically tied to automated sales logic, such as a Recurly Subscriptions plan or item charge. The system’s tax engine requires a clear, auditable transaction origin (a charge, a debit, or a one-time charge) linked to a product and a customer address to apply the correct jurisdiction-based tax rate.

• Manual credits, created by a merchant for reasons like service adjustments or goodwill, are treated as a form of account balance adjustment.

• Because manual credits lack this specific transactional context and product link, the system bypasses tax calculation.

Workaround for Tax Adjustments

If you need to refund a transaction and adjust the associated tax, you should not use a manual credit.

• Use the standard Refund action on the original invoice.

• This process correctly flags the refund as a tax reversal event, which ensures the tax rate is determined and reversed appropriately.