Tariffs - What Are You Doing?

New tariffs are here (for U.S. users) and it seems every manufacturer is dealing with them differently. Some added the tariff as a line item on bills without adjusting MSRP, some added it to item cost without adjusting MSRP, some treated it as a regular price increase, adjusting both cost and MSRP, and several don’t know what they’re doing yet.

You may consider adding the tariff as a freight charge, but the two states that have provided clear guidance already have indicated that sales tax is to be collected on the tariff as it is considered a cost of goods sold, not ‘freight’. That alone is enough to get other states to do the same, whether announced or not.

Also, if I’ve learned anything from the ‘card convenience fee’ debate, it’s that the general public would rather pay a higher price and not know where it goes than pay a lower price and know where it goes because it feels better. This is also true in the car market, where customers prefer to think that a dealership is giving them an overpriced trade-in value for the car they are upside down in than see that they are actually using the discount off MSRP to pay off their bloated 7 year term car note. Anything to keep their monthly payment at $X/month. We offer a discount for paying with check or ACH to solve that issue.

While you may agree or disagree with tariffs as a tool, or whether or not the U.S. should impose the same tariff on countries that they charge on our goods exported to those countries, we need to deal with them. We can no longer take MSRP x a multiplier in many cases to get our cost. This makes updating price lists very difficult.

For us, I’m adding the tariff to our cost and our margin is our margin. I know we need to average 65%-68% markup or 39%-41% margin to pay for materials, overhead, sales and office labor, taxes and still have money left for owners and investment at the end of the month. MSRP doesn’t factor into that equation. I can’t part out the tariffs as though they don’t cost anything when they are sitting on top of a fireplace in my warehouse. If they were being paid like sales tax, once the product was sold, that would be a different story. Manufacturers trying to sell it to us as such need to be called out on the practice.

With regard to Striven, it would be great if there were a Misc Fee that could be added per item, like freight, that could be taxed or not. In addition to the easier price list updates for the immediate future, it could also be used for automatic discounting for sale items, floor models or obsolete inventory. It could be used to add carrying cost to inventory that you need to hold in inventory longer to make sure you have it when you need it, or to reach pricing minimums. It could be used to add a labor fee for processing or packaging. Sure, item groups can perform a similar task, but the process is tedious for something simple like a single charge.

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For manufacturers that redistributed an adjusted price list it was pretty easy; but not for those that are using “surcharge of 5%” as a temporary solution. A misc. item would be nice.

What if we created a separate line item and use built in calculator function in PRICE to calculate ($100*.05)? Not sure how the accounting side would handle cost on the backend? FireplaceCenterKC would not markup “surcharges” but Striven would still need to account for the COST side of this on the backend I would think for accounting purposes.

@Sam and @wzane w/regards to Darin’s comments above, I AGREE. We need Striven to implement an additonal fee AT THE ITEM LEVEL that allows for tariff charges or a misc fee that has the option of being taxable or not. We cannot bundle S&H fees w/tariffs and adding a new item for tariffs won’t work either unless you have 1 vendor. In our current situation because the S&H is at the state level and tariffs are at the federal level, there just isn’t a good option as the system stands today. Is there anything we can do quickly that would allow for this change/addition to the system? Suggestions on quick fixes??

My workaround for now was to modify the xls price lists to keep the tariff add-on as a column for all of the ‘tariff’ price lists I’ve received. I use a formula to get my new cost and everything else functions normally. When/If the tariffs change/go away, it will be quick to modify and upload a new price list.

We aren’t showing tariff charges separately on POs, SOs, etc… as they are treated as a cost of goods sold for tax purposes, and I am simply including them as part of the cost of the product.

After talking to Striven yesterday AM (we have one manufacturer that is charging 5% and not issuing new price list…yet), we decided to use the discount item as a work around. Just have to change qty from - to a + amount. Still curious about how this ties back to cogs in accounting @Ckelly.

For accounting purposes, it’s best practice to call this new discount item or items, “Tariff-Napoleon”, “Tariff-Stoll”, and so on.

When creating items, set them as taxable and assign your appropriate product income account.

Then, make your description have the percentage so you sales staff don’t need to look it up.

Thanks,

Darin Bricker
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Greetings all,

Here at Striven, we love to see our community come together in such a way to face and overcome new challenges within this software we all share. Through a shared meeting, we were able to navigate to a suitable - if brief - solution to utilize Discount Type Items as a Tariff Charge by setting the discount % on the Sales Order and ensuring that the Discount Item is changed from a negative value to a positive one to convert the discount to a charge.

Many thanks to everyone here who identified this new obstacle and came together to brainstorm a solution to share with others. We are proud to foster such a brilliant and empowering community where this information can benefit us all.

On behalf of the Striven Team, thanks again.

Always at your service,

Ashley