Quantity-based tax rules
Automating tax rules for Canadian coffee shops and bakeries.
Background
I led design for the Canadian market on Square's International Product team, where we focused on growing adoption among food and beverage sellers—including coffee shops and bakeries.
In Canada, many food and drink items (such as baked goods) have been subject to reduced tax rates or full exemptions for over a decade, provided specific quantity thresholds are met. At the time, Square's sales tax feature did not support quantity-based tax rules. Sellers often discovered this limitation only after onboarding, leading to confusion and frustration—especially among our core ICP of coffee shops and bakeries. As a result, sellers struggled to remain compliant with local tax regulations, increasing their risk of tax exposure and forcing them to rely on manual workarounds instead of automated tooling. This gap directly impacted revenue, with Sales reporting approximately $3M in blocked GPV tied to the missing functionality—and represented an $89M market opportunity to unlock.
The problem
To remain compliant with Canadian tax rules, coffee shops and bakeries are forced to manually toggle taxes on and off at checkout for each transaction involving baked goods. This workflow is time-consuming, error-prone, and difficult to execute consistently, as cashiers are rarely trained or confident in applying nuanced tax rules.
This results in:
Improper tax calculations, heightened tax exposure, and incorrect pricing for buyers
Slowed down staff workflows and buyer interactions causing huge delays
Customers walking out and staff losing their tips
Key challenges
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Becoming an Expert in Canadian Tax Rules
Tax rules varied significantly by province, with nuances that affected how exemptions were applied — often interpreted inconsistently by sellers and internal teams. Because tax compliance carries real financial and legal risk, we couldn't rely on assumptions. We had to deeply understand how these rules worked in practice before they could be accurately reflected in product behavior.
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Balancing Control with Strict Legal Constraints
Square cannot provide tax advice, as compliance and interpretation ultimately sit with the seller. This ruled out automated categorization and pre-defined rules, so we focused on flexible tooling that let sellers configure their own tax rules across all Canadian provinces.
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Validating the Right Solution Scope
The team initially proposed a single quantity-based exemption rule. I wasn't convinced this would fully address Canadian bakery requirements across provinces, so I stress-tested different capability combinations against real checkout scenarios. Only the full set — quantity-based rules, tax reductions, and rule combining — reliably supported all provincial requirements. I aligned the team on the risk of shipping a partial solution before presenting findings at an early stakeholder review.
The solution
To balance speed and impact, we delivered the solution in two milestones. The first milestone supported sellers outside Ontario by introducing quantity-based tax rules. The second addressed Ontario's more complex requirements by adding tax reductions and support for rules with multiple conditions. This phased approach allowed us to deliver meaningful value quickly while progressing toward a complete, nationwide solution.
Quantity-based tax exemption
This rule applies to businesses in BC, Quebec, and other provinces.
Baked goods sold in quantities of six or more are fully tax-exempt.
For sellers handling tax rules outside of Ontario, I designed a quantity threshold trigger that automatically applies a full tax exemption at checkout—eliminating the manual toggling cashiers previously had to do mid-transaction, and removing the risk of inconsistent tax application across staff.
Multi-condition tax reduction
This rule applies to businesses in Ontario.
HST reduces from 13% to 5% when items are sold in quantities fewer than six and the pre-tax price is under $4—both conditions must be met.
Ontario is home to the bulk of Square's Canadian bakery and coffee shop sellers, making it the most critical province to get right. I designed the ability to reduce tax rates and create multi-conditional rules, so sellers could capture both thresholds in a single rule—eliminating the need to create two separate taxes and manually toggle them on and off at checkout.
Outcomes & impact
Shipped August 7, 2025
- Because accurate tax application and improved seller workflows can't be reliably measured through quantitative data, we relied primarily on qualitative feedback to assess success. To date, we've received no reports of incorrect tax application or frustration during setup, indicating the solution effectively addressed the core problem for sellers
- Beyond the original scope, this work unlocked support for VAT rules in Spain, France, and Ireland—a significant win that scaled the solution globally, expanded Square's tax capabilities, and reduced future engineering and design effort by establishing a flexible foundation for additional tax rules
Reflection & learnings
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Measuring success isn't always in the numbers
This was one of my first projects where success couldn't be evaluated solely through data. We relied on qualitative feedback to validate that the solution effectively addressed the core problem.
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Guiding principles make design decisions easy
Establishing clear, project-specific design principles early helped me navigate ambiguity, evaluate tradeoffs, and align on the right solution throughout my process.