U.S. patent number RE44,189 [Application Number 13/175,108] was granted by the patent office on 2013-04-30 for selective escrow using electronic funds transfer.
This patent grant is currently assigned to DAVO Technologies LLC. The grantee listed for this patent is Owen H. Brown, David N. Joseph. Invention is credited to Owen H. Brown, David N. Joseph.
United States Patent |
RE44,189 |
Brown , et al. |
April 30, 2013 |
**Please see images for:
( Certificate of Correction ) ** |
Selective escrow using electronic funds transfer
Abstract
A method is employed to impound funds from merchant sales
electronically in an escrow account for later use such as payment
of associated sales taxes. An electronic funds processor (EFP)
determines escrow information for credit/debit card charge payment
requests made by the merchant via a credit/debit card terminal,
forwards the requests to one or more credit/debit card issuers,
extracts an escrow amount from payments made by the issuers to the
merchant, and credits an escrow account of the merchant with the
extracted amounts. An escrow agent periodically makes payments from
the escrow account, and provides associated reporting to the
merchant. The merchant is able to report cash sales via the
credit/debit card terminal, and associated escrow amounts are
extracted from credit/debit card payments or from another merchant
account.
Inventors: |
Brown; Owen H. (Montclair,
NJ), Joseph; David N. (Bowdoinham, ME) |
Applicant: |
Name |
City |
State |
Country |
Type |
Brown; Owen H.
Joseph; David N. |
Montclair
Bowdoinham |
NJ
ME |
US
US |
|
|
Assignee: |
DAVO Technologies LLC
(Montclaie, NJ)
|
Family
ID: |
32993279 |
Appl.
No.: |
13/175,108 |
Filed: |
July 1, 2011 |
Related U.S. Patent Documents
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Application
Number |
Filing Date |
Patent Number |
Issue Date |
|
|
10010340 |
Dec 5, 2001 |
|
|
|
|
60445782 |
Feb 7, 2003 |
|
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Reissue of: |
10775751 |
Feb 9, 2004 |
7801813 |
Sep 21, 2010 |
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Current U.S.
Class: |
705/39;
705/37 |
Current CPC
Class: |
G06Q
40/025 (20130101); G06Q 20/10 (20130101); G06Q
40/123 (20131203); G06Q 20/04 (20130101); G06Q
40/02 (20130101); G06Q 20/14 (20130101) |
Current International
Class: |
G06Q
40/00 (20060101) |
References Cited
[Referenced By]
U.S. Patent Documents
Other References
Unmask the hidden costs of self-employment, Home Office Computing,
V10, n6, p. 62-6, Jun. 1992. cited by examiner .
Louisiana Senate Passes Plan to Pay recovery district debt,
Christopher McEntee, Bond Buyer v. 316, n29915, p. 2, Jun. 10,
1996. cited by examiner .
UK Auction Site Takes on Europe and ebay, John Lamb, Information
Week, n809, pp. 68, Oct. 23, 2000. cited by examiner .
United States Patent and Trademark Office Decision of Appeal dated
Dec. 10, 2007, issued for the corresponding U.S. Appl. No.
10/010,340. cited by applicant.
|
Primary Examiner: Ebersman; Bruce I
Attorney, Agent or Firm: Lerner, David, Littenberg, Krumholz
& Mentlik, LLP
Parent Case Text
CROSS-REFERENCE TO RELATED APPLICATION
The present application is a continuation-in-part of and claims
priority under 35 U.S.C. .sctn.120 from U.S. patent application
Ser. No. 10/010,340, which was filed on Dec. 5, 2001 now abandoned,
and under 35 U.S.C. .sctn.119(e) from U.S. Provisional Patent
Application Ser. No. 60/445,782, which was filed on Feb. 7, 2003.
The disclosures of U.S. patent application Ser. Nos. 10/010,340 and
60/445,782 are hereby incorporated by reference.
Claims
The invention claimed is:
1. A computer-implemented method for impounding escrow funds by an
electronic funds processor (EFP) in a computer system from credit
or debit card transactions of a merchant associated with a closeout
period, the method comprising the steps of: determining a first
sales amount in the computer system EFP associated with one or more
non-credit or non-debit card transactions of the merchant during
the closeout period; determining a second sales amount in the
computer system EFP associated with one or more credit or
.[.non-debit.]. .Iadd.debit .Iaddend.card transactions of the
merchant during the closeout period; determining an escrow amount
in the computer system EFP based on the first sales amount, wherein
the escrow amount is determined as one of: (1) a predetermined
percentage of one or more of the first and second sales amounts,
and (2) a sum of a predetermined percentage of at least one of the
first and second sales amounts, and wherein said predetermined
percentage comprises: (1) a merchant tax rate, and (2) an estimate
for generating escrow funds sufficient to pay a predetermined sum
from the one or more of the first and second sales amounts over a
predetermined number of sales periods; determining in the computer
system EFP whether the second sales amount exceeds the escrow
amount; crediting an escrow account with the escrow amount in the
computer system EFP when the second sales amount exceeds the escrow
amount; crediting a merchant account with an amount equal to the
difference between the second sales amount and the escrow amount;
determining a payable amount to be paid from the escrow account;
and debiting the payable amount from the escrow account, wherein
the payable amount is debited for payment to one or more of a local
tax authority, a state tax authority, a federal tax authority, a
judicial authority, a recipient of a legal judgment and a
merchant.
2. The method of claim 1, wherein the one or more non-credit or
non-debit card transactions are cash transactions.
3. The method of claim 1, wherein one or more non-credit or
non-debit card transactions are each facilitated using a payment
instrument selected from the group consisting of personal checks,
money orders, bank checks, travelers checks, gift checks, gift
certificates, and cash.
4. The method of claim 1, comprising the additional steps of:
determining a payable amount to be paid from the .[.first.]. escrow
account; and debiting the payable amount from the .[.first.].
escrow account.
5. A computer-implemented method for impounding escrow funds by an
electronic funds processor (EFP) in a computer system from credit
or debit card transactions of a merchant associated with a closeout
period, the method comprising the steps of: determining a first
sales amount in the computer system EFP associated with one or more
taxable non-credit or non-debit card transactions of the merchant
during the closeout period; determining a second sales amount in
the computer system EFP associated with one or more taxable credit
or debit card transactions of the merchant during the closeout
period; determining a third sales amount associated with one or
more non taxable credit or debit card transactions of the merchant
during the closeout period; determining an escrow amount in the
computer system EFP based on the sum of the first and second sales
amounts, wherein the escrow amount is determined as one of; (1) a
predetermined percentage of one or more of the first and second
sales amounts, and (2) a sum of a predetermined percentage of at
least one of the first and second sales amounts, and wherein said
predetermined percentage comprises: (1) a merchant tax rate, and
(2) an estimate for generating escrow funds sufficient to pay a
predetermined sum from the one or more of the first and second
sales amounts over a predetermined number of sales periods;
determining whether the sum of the second and third sales amounts
exceeds the escrow amount; crediting an escrow account with the
escrow amount when the sum of the second and third sales amounts
exceeds the escrow amount; crediting a merchant account with an
amount equal to the difference between the sum of the second and
third sales amounts and the escrow amount; determining a payable
amount to be paid from the escrow account; and debiting the payable
amount from the escrow account, wherein the payable amount is
debited for payment to one or more of a local tax authority, a
state tax authority, a federal tax authority, a judicial authority,
a recipient of a legal judgment and a merchant.
6. The method of claim 5, wherein the predetermined percentage is
increased over the merchant tax rate in order to facilitate payment
of back taxes.
7. A computer-implemented method for impounding escrow funds by an
electronic funds processor (EFP) in a computer system from sales
transactions of a merchant associated with a closeout period, the
method comprising the steps of: determining a first sales amount in
the computer system EFP associated with one or more sales
transactions of the merchant during the closeout period;
determining a second sales amount in the computer system EFP
associated with one or more credit or debit card transactions of
the merchant during the closeout period; determining an escrow
amount in the computer system EFP based on the first sales amount,
wherein the escrow amount is determined as one of: (1) a
predetermined percentage of one or more of the first and second
sales amounts, and (2) a sum of a predetermined percentage of at
least one of the first and second sales amounts, and wherein said
predetermined percentage comprises: (1) a merchant tax rate, and
(2) an estimate for generating escrow funds sufficient to pay a
predetermined sum from the one or more of the first and second
sales amounts over a predetermined number of sales periods;
determining whether the second sales amount in the computer system
EFP exceeds the escrow amount; crediting an escrow account with the
escrow amount when the second sales amount exceeds the escrow
amount; crediting a merchant account with an amount equal to the
difference between the second sales amount and the escrow amount;
determining a payable amount to be paid from the escrow account;
and debiting the payable amount from the escrow account, wherein
the payable amount is debited for payment to one or more of a local
tax authority, a state tax authority, a federal tax authority, a
judicial authority, a recipient of a legal judgment and a
merchant.
8. A computer-implemented method for impounding escrow funds by an
electronic funds processor (EFP) in a computer system from sales
transactions of a merchant associated with a closeout period, the
method comprising the steps of: determining a first sales amount in
the computer system EFP associated with one or more sales
transactions of the merchant during the closeout period;
determining a second sales amount in the computer system EFP
associated with one or more credit or debit card transactions of
the merchant during the closeout period; determining a plurality of
escrow amounts based on the first sales amount, wherein each of the
plurality of escrow amounts are determined as one of: (1) a
predetermined percentage of one or more of the first and second
sales amounts, and (2) a sum of a predetermined percentage of at
least one of the first and second sales amounts, and wherein said
predetermined percentage comprises: (1) a merchant tax rate, and
(2) an estimate for generating escrow funds sufficient to pay a
predetermined sum from the one or more of the first and second
sales amounts over a predetermined number of sales periods;
determining in the computer system EFP whether the second sales
amount exceeds the sum of the plurality of escrow amounts; and
crediting one of a plurality of escrow accounts with a
corresponding one of the plurality of escrow amounts when the
second sales amount exceeds the sum of the plurality of escrow
amounts; crediting a merchant account with an amount equal to the
difference between the second sales amount and the sum of the
plurality of escrow amounts; determining a payable amount to be
paid from one of the plurality of escrow accounts; and debiting the
payable amount from one of the plurality of escrow accounts,
wherein the payable amount is debited for payment to one or more of
a local tax authority, a state tax authority, a federal tax
authority, a judicial authority, a recipient of a legal judgment
and a merchant.
.Iadd.9. A computer-implemented method for impounding escrow funds
by an electronic funds processor (EFP) in a computer system, the
method comprising the steps of: determining a first sales amount in
the computer system EFP associated with one or more non-credit or
non-debit card transactions of the merchant during the closeout
period; determining a second sales amount in the computer system
EFP associated with one or more credit or debit card transactions
of the merchant during the closeout period; determining an escrow
amount in the computer system EFP based on the first sales amount,
wherein the escrow amount is determined as one of: (1) a
predetermined percentage of one or more of the first and second
sales amounts, and (2) a sum of a predetermined percentage of at
least one of the first and second sales amounts, and wherein said
predetermined percentage comprises: (1) a merchant tax rate, and
(2) an estimate for generating escrow funds sufficient to pay a
predetermined sum from the one or more of the first and second
sales amounts over a predetermined number of sales periods, wherein
the estimate can be zero if no amount is owed by the merchant
beyond the merchant tax rate; determining in the computer system
EFP whether the second sales amount exceeds the escrow amount;
crediting an escrow account with the escrow amount in the computer
system EFP when the second sales amount exceeds the escrow amount;
crediting a merchant account with an amount equal to the difference
between the second sales amount and the escrow amount; determining
a payable amount to be paid from the escrow account; and debiting
the payable amount from the escrow account, wherein the payable
amount is debited for payment to one or more of a local tax
authority, a state tax authority, a federal tax authority, a
judicial authority, a recipient of a legal judgment and a
merchant..Iaddend.
.Iadd.10. The method of claim 9, wherein the one or more non-credit
or non-debit card transactions are cash transactions..Iaddend.
.Iadd.11. The method of claim 9, wherein one or more non-credit or
non-debit card transactions are each facilitated using a payment
instrument selected from the group consisting of personal checks,
money orders, bank checks, travelers checks, gift checks, gift
certificates, and cash..Iaddend.
.Iadd.12. The method of claim 9, comprising the additional steps
of: determining a payable amount to be paid from the escrow
account; and debiting the payable amount from the escrow
account..Iaddend.
.Iadd.13. A computer-implemented method for impounding escrow funds
by an electronic funds processor (EFP) in a computer system, the
method comprising the steps of: determining a first sales amount in
the computer system EFP associated with one or more taxable
non-credit or non-debit card transactions of the merchant during
the closeout period; determining a second sales amount in the
computer system EFP associated with one or more taxable credit or
debit card transactions of the merchant during the closeout period;
determining a third sales amount associated with one or more non
taxable credit or debit card transactions of the merchant during
the closeout period; determining an escrow amount in the computer
system EFP based on the sum of the first and second sales amounts,
wherein the escrow amount is determined as one of: (1) a
predetermined percentage of one or more of the first and second
sales amounts, and (2) a sum of a predetermined percentage of at
least one of the first and second sales amounts, and wherein said
predetermined percentage comprises: (1) a merchant tax rate, and
(2) an estimate for generating escrow funds sufficient to pay a
predetermined sum from the one or more of the first and second
sales amounts over a predetermined number of sales periods, wherein
the estimate can be zero if no amount is owed by the merchant
beyond the merchant tax rate; determining whether the sum of the
second and third sales amounts exceeds the escrow amount; crediting
an escrow account with the escrow amount when the sum of the second
and third sales amounts exceeds the escrow amount; crediting a
merchant account with an amount equal to the difference between the
sum of the second and third sales amounts and the escrow amount;
determining a payable amount to be paid from the escrow account;
and debiting the payable amount from the escrow account, wherein
the payable amount is debited for payment to one or more of a local
tax authority, a state tax authority, a federal tax authority, a
judicial authority, a recipient of a legal judgment and a
merchant..Iaddend.
.Iadd.14. The method of claim 13, wherein the predetermined
percentage is increased over the merchant tax rate in order to
facilitate payment of back taxes..Iaddend.
.Iadd.15. A computer-implemented method for impounding escrow funds
by an electronic funds processor (EFP) in a computer system, the
method comprising the steps of: determining a first sales amount in
the computer system EFP associated with one or more sales
transactions of the merchant during the closeout period;
determining a second sales amount in the computer system EFP
associated with one or more credit or debit card transactions of
the merchant during the closeout period; determining an escrow
amount in the computer system EFP based on the first sales amount,
wherein the escrow amount is determined as one of: (1) a
predetermined percentage of one or more of the first and second
sales amounts, and (2) a sum of a predetermined percentage of at
least one of the first and second sales amounts, and wherein said
predetermined percentage comprises: (1) a merchant tax rate, and
(2) an estimate for generating escrow funds sufficient to pay a
predetermined sum from the one or more of the first and second
sales amounts over a predetermined number of sales periods, wherein
the estimate can be zero if no amount is owed by the merchant
beyond the merchant tax rate; determining whether the second sales
amount in the computer system EFP exceeds the escrow amount;
crediting an escrow account with the escrow amount when the second
sales amount exceeds the escrow amount; crediting a merchant
account with an amount equal to the difference between the second
sales amount and the escrow amount; determining a payable amount to
be paid from the escrow account; and debiting the payable amount
from the escrow account, wherein the payable amount is debited for
payment to one or more of a local tax authority, a state tax
authority, a federal tax authority, a judicial authority, a
recipient of a legal judgment and a merchant..Iaddend.
.Iadd.16. A computer-implemented method for impounding escrow funds
by an electronic funds processor (EFP) in a computer system, the
method comprising the steps of: determining a first sales amount in
the computer system EFP associated with one or more sales
transactions of the merchant during the closeout period;
determining a second sales amount in the computer system EFP
associated with one or more credit or debit card transactions of
the merchant during the closeout period; determining a plurality of
escrow amounts based on the first sales amount, wherein each of the
plurality of escrow amounts are determined as one of: (1) a
predetermined percentage of one or more of the first and second
sales amounts, and (2) a sum of a predetermined percentage of at
least one of the first and second sales amounts, and wherein said
predetermined percentage comprises: (1) a merchant tax rate, and
(2) an estimate for generating escrow funds sufficient to pay a
predetermined sum from the one or more of the first and second
sales amounts over a predetermined number of sales periods, wherein
the estimate can be zero if no amount is owed by the merchant
beyond the merchant tax rate; determining in the computer system
EFP whether the second sales amount exceeds the sum of the
plurality of escrow amounts; and crediting one of a plurality of
escrow accounts with a corresponding one of the plurality of escrow
amounts when the second sales amount exceeds the sum of the
plurality of escrow amounts; crediting a merchant account with an
amount equal to the difference between the second sales amount and
the sum of the plurality of escrow amounts; determining a payable
amount to be paid from one of the plurality of escrow accounts; and
debiting the payable amount from one of the plurality of escrow
accounts, wherein the payable amount is debited for payment to one
or more of a local tax authority, a state tax authority, a federal
tax authority, a judicial authority, a recipient of a legal
judgment and a merchant..Iaddend.
Description
FIELD OF THE INVENTION
The present invention relates to a method for impounding escrow
funds from debit/credit card payments made to a merchant. More
specifically, the present invention relates to a method for
impounding escrow funds from debit/credit card payments made to a
merchant, where the impounded escrow funds are determined in
relation to at least one of credit, debit and cash sales made by
the merchant.
BACKGROUND OF THE INVENTION
Computers facilitate with high speed and accuracy a vast myriad of
commercial transactions--including credit card transactions.
Merchants, who collect from their customers not only the retail
charges for purchased goods and services but in addition collect
customer payments for sales taxes on those purchases, are
responsible for periodically transmitting to the appropriate taxing
authority the accumulated tax payments received, typically monthly
or quarterly for State taxing authorities. At the end of each such
period, some merchants find that they have spent or otherwise
failed to segregate and retain sufficient funds to make the
required tax payment to the taxing authority.
There is a need to for an improved method by which a merchant may
allocate and escrow funds for periodic payment of customer sales
taxes owed to a tax authority. Toward this end, it is highly
desirable that the improved method enable collection, escrowing and
payment to be performed by one or more third parties in order to
enable the merchant's direct participation may be limited to a
"passive" role. In addition, the method must be capable of
generating appropriate payment forms and reports as required by the
merchant and the taxing authority.
SUMMARY OF THE INVENTION
A method is disclosed for impounding escrow funds by an electronic
funds processor (EFP) associated with sales transactions of a
merchant during a close-out period. The method includes the steps
of determining a first sales amount associated with one or more
sales transactions of the merchant during the closeout period,
determining a second sales amount specifically associated with one
or more credit/debit card transactions of the merchant during the
closeout period, determining an escrow amount based on the first
sales amount, determining whether the second sales amount exceeds
the escrow amount, and crediting an escrow account with the escrow
amount and a merchant account with an amount equal to the
difference between the second sales amount and the escrow amount
when the second sales amount exceeds the escrow amount.
In a preferred embodiment, the method impounds escrow funds for
paying a sales tax owing on merchant sales. In this preferred
embodiment, the first sales amount is associated with taxable sales
transactions including at least one of taxable credit/debit card
sales and taxable non-credit/debit card sales, and the second sales
amount is associated with taxable and non-taxable credit/debit card
transactions of the merchant made during the closeout period. An
escrow agent (for example, a third-party bank or other financial
institution) periodically makes payments from the escrow account,
and provides associated reporting to the merchant and the
associated tax authority.
In this manner, for example, a merchant may provide for ongoing and
automatic collection of funds to pay sales taxes by the escrow
agent. Similarly, the merchant may provide for periodic, automatic
payment of taxes from the collected funds to tax authority. In this
manner, the merchant's direct role in such collections effectively
becomes passive.
The method also contemplates other applications in which a merchant
desires or is otherwise required to effect a withholding of funds
collected from credit-bases sales transactions (for example, by
local, state and federal tax authorities, judicial authorities, and
payees who have received legal judgments against a merchant). In
addition, the method contemplates impounding merchant escrow funds
for paying back payroll taxes or back real estate taxes, or for
effecting a merchant savings account.
BRIEF DESCRIPTION OF THE DRAWINGS
A more complete understanding of the invention may be obtained by
reading the following description of specific illustrative
embodiments of the invention in conjunction with the appended
drawing in which:
FIG. 1 provides a first schematic diagram illustrating elements of
the inventive method;
FIG. 2 provides a second schematic diagram illustrating elements of
the inventive method;
FIG. 3 provides a third schematic diagram illustrating a process
for obtaining authorization for a credit card sale; and
FIGS. 4A-4C illustrate sample escrow transactions involving
non-credit/debit card sales.
DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENTS
The following detailed description includes a description of the
best mode or modes of the invention presently contemplated. Such
description is not intended to be understood in a limiting sense,
but to be an example of the invention presented solely for
illustration thereof, and by reference to which in connection with
the following description and the accompanying drawing one skilled
in the art may be advised of the advantages and construction of the
invention.
Currently, electronic hinds processors (EFPs) are commonly used in
the industry for managing credit and debit card transactions
between merchants and banks. This function often includes the
collection of associated service fees by the EFP on behalf of the
credit/debit card provider (for example, Visa/MC, Discover, and
Diner's Club) for electronic funds transfer (EFT) to a merchant
account. Alternatively, in the case of American Express (AMEX),
service fees are first deducted before net sales (less service
fees) are EFT deposited by AMEX in the merchant account.
In accordance with the present invention, a selective escrow method
is disclosed in which a third party (the EFP) collects merchant
funds to be escrowed for payment of customer sales tax. The method
can be described as follows.
Initially, information entered at a credit card/debit terminal (for
example, entry of the credit/debit card number by swiping, and
purchase amount and card expiration by keypad entry) is received by
the EFP and forwarded to a credit/debit card issuer for
authorization. Authorization is provided (for example, as indicated
by an issuer-assigned confirmation number) and forwarded by the
provider via the EFP to the merchant for storage in the credit card
terminal. Currently, there are a number of manufacturers (for
example, HYPERCOM, TRANS330, and NCR) making credit/debit card
terminals (for example, MAC, NYCE, and check debit card) for use on
the merchant level.
At the end of a transaction period (for example, at the end of each
day), the merchant "closes out" credit/debit card sales at a credit
card terminal, thereby requesting to the EFP that payments
reflecting the daily sales be made to the merchant's account.
Once the EFP has obtained the request funds from the credit/debit
card issuers, customer sales tax owing is debited from the gross
taxable sales, and the net funds are sent on via EFT to the
merchant's account or to another provider (such as American
Express) for delivery to the merchant's account. The debited tax
portion is credited to an escrow account for making future tax
payments.
Because sales tax owed can be readily determined from the number,
nature and place of merchant sales, the EFP can be provided with
instructions to readily and automatically facilitate the escrow
process in order to relieve the merchant from having to deal with
holding funds aside and otherwise manage the process of making
sales tax payments. Software currently used by the EFP to manage
the credit/debit card issuer fee debiting process can be readily
adapted to carry out the merchant instructions.
Once deposited in the escrow account, funds may be transferred at
defined schedules to state tax authorities (or other owed parties)
by the escrow agent in order to meet the merchant's tax payment
obligations. In consideration for performing this service, the
escrow agent may be reimbursed, for example, by retaining interest
earned on funds ("float") in the account in between payment
periods.
As previously noted, the method may be easily incorporated in the
software the EFP currently uses, for example, to deduct the
credit/debit card provider fees charged to the merchant for account
transactions. FIG. 3 illustrates this present process. Credit/debit
card providers charge whatever is a competitive rate to get a
merchants business, and usually take their fees at the end of the
month based on the merchant's gross sales. American Express takes
its fees following each batch of transactions of recent
transactions submitted by the merchant.
Accordingly, the present invention provides a method by which sales
tax for customer sales transactions can be directly debited by an
EFP from credit/debit card transactions, escrowed by a third party
(for example, a major bank or other financial institution) and paid
to the tax authority, all with little or no imposition of burden on
the merchant. This method can be easily implemented, as the EFP is
already processing credit/debit transactions in order to credit the
gross amount of a credit card transaction, less the bank provider's
fees, to the merchant's bank account. The method can also easily
account for and discount sales transactions that are exempted from
paying customer sales tax, so that no debit and escrow of such sums
occurs from such transactions.
Customer sales tax owed for cash transactions (for example,
payments made with physical currency, checks or other foreseeable
items of monetary value) can also be accommodated by the present
method. A number of approaches for escrowing customer sales tax
accruing from cash transactions are contemplated by the present
invention, and are disclosed as follows.
In a first approach, at the end of the day after closing out
his/her credit card terminal and sending the transaction via EFT to
EFT, the merchant "swipes" a card which can be called a "cash
transaction tax debit" card or CTTD card, through his/her credit
card terminal. This CTTD card may be be provided, for example, by a
banking institution of the merchant for the purpose of facilitating
debiting of the taxable portion of cash sales from the merchant's
account at the banking institution for credit to the escrow
account. As an alternative to using the CTTD card, the merchant may
enter a banking institution provided personal identification number
(PIN), or the credit/debit card terminal provide may provide a
special function button on the terminal for this purpose. The
special function button would allow the merchant to enter the total
of his or her cash transactions, either daily or monthly or other
selectable period, and transmit this information to the EFP.
A taxable portion of the reported cash transactions would be
calculated by the EFP, debited from the merchant's account and
credited to the escrow account. Of course, the merchant may prefer
to perform the cash transaction closing process at a variety of
intervals (for example, once monthly) instead of daily.
An alternative approach for collecting cash transaction sales tax,
which may be preferred, is further described herein. As described
previously, a merchant may be provided with either one of a swipe
card or a PIN for processing cash transactions from the merchant's
terminal when doing a close out. Both approaches allow the merchant
to make what is referred to as a "forced entry" for the cash sales
when closing out their terminal.
The forced entry provides information to the EFP indicating the
total cash sales and how much sales tax to debit. Sales tax for
cash sales could be escrowed, for example, by debiting it from the
merchant's business checking account. For example, if sales tax is
6% and cash sales are $100, $6.00 would be debited from the
merchant's checking account and credited to the tax escrow account
along with the sales tax debited from credit card sales. The
merchant would retain the cash from the cash sales and deposit it
into his business checking account.
As an alternative, the "forced entry" may be eliminated by a method
of tax debiting in which the reporting of cash and non taxable
sales is integrated into the terminal closeout process.
Instead of a forced entry for the cash and non taxable sales, the
credit/debit card terminal is configured to collect and report
three sales transaction totals associated with a closeout period:
one for credit card sales, one for cash sales and one for non
taxable sales. This may be accomplished, for example, by suitable
programming of the terminal (conventional terminals, for example,
have been programmed to ask operators to report whether a
transaction is taxable or non taxable) For each tax jurisdiction,
the merchant's terminal is programmed to add the credit card and
cash sales, subtract the non taxable sales, and calculate the
percentage of tax to be escrowed based on the tax jurisdiction. The
percentage of tax from the combined credit card and cash sales is
then debited from authorized credit card funds, and deposited into
the tax escrow account. The merchant retains all funds received
from cash sales (and for example, may deposit these in the merchant
bank account).
Three examples illustrating escrow transactions at the merchant
terminal are illustrated in FIGS. 4A-4C. In FIG. 4A, all reported
sales transaction in the closeout period are credit sales, each
owing a 6% tax in a tax jurisdiction. Total sales tax escrow is
computer based on the tax rate and total credit card sales, a net
credit card deposit (less escrowed tax funds) is deposited in the
merchant account.
In FIG. 4B, total credit and total cash sales are each reported for
a closeout period, each owing a 6% tax in a tax jurisdiction.
Credit and cash sales are totaled, and a total sales tax escrow is
computed based on the tax rate and on total sales. A net credit
card deposit (less escrowed tax funds representing tax owed both on
credit and cash sales) is deposited in the merchant account.
In FIG. 4C, both taxable and non-taxable credit and cash sales
totals are reported. For example, state laws may characterize
certain sales as non-taxable (for example, clothes purchases in New
Jersey are generally non-taxable). Each taxable sale owes a 6% tax
in a tax jurisdiction. Taxable and non-taxable totals are prepared
for both total credit and total cash sales during the closeout
period, and a total sales tax escrow is computed based on the tax
rate and on total taxable credit and cash sales. For example, all
cash and credit sales may be totaled, and non-taxable cash sales
and non-taxable credit sales may be subtracted from total cash and
credit sales to produce total taxable sales. The tax rate is then
applied to total taxable sales to determine the tax escrow. A net
credit card deposit (total credit card sales less tax escrow and
any other applicable service fees) is deposited in the merchant
account. All cash collected remains in hand with the merchant.
In addition to escrowing funds for sale tax owed on cash sales, the
above-disclosed method may be extended, for example, to sales made
via mail/phone/fax orders and Internet sales.
In order to extend the method accordingly, mail/phone/fax sales and
Internet sales may be identified with tax codes for taxable and non
taxable sales. Currently, these sales may only be taxable if you
are ordering from the same state in which the merchant is based, or
alternatively if the merchant you are ordering from has a retail
outlet in your state. The associated rules tend to be reasonably
straight forward, and accordingly easily incorporated for example
in existing software that the merchant may be using to track orders
and delivery for such sales. Such merchant sales information could
be reported to the EFP and escrow agent via an interface from the
tracking software to the merchant terminal, or alternatively by
other automated communications means (for example, e-commerce). An
interface to the merchant terminal provides an advantage of
enabling the merchant to close out these transactions
coincidentally with closing other transactions recorded at the
terminal.
As sales tax collected from mail/phone/fax order and Internet sales
will generally be based on the tax jurisdiction in which the sale
is initiated, a merchant must collect applicable sales tax based on
the tax jurisdiction of where the sale is initiated, and file that
tax in accordance with that jurisdiction's tax laws. Accordingly,
each taxable sale would additionally identify the associated tax
jurisdiction. Once again, the jurisdiction may be easily determined
from a customer's order information, and means for determining the
jurisdiction thereby easily incorporate in the merchant's existing
order and delivery tracking software.
As a result, such information may be collected and provided to the
escrow agent so that sales tax owed from mail/phone/fax sales and
Internet sales within a closeout period can be escrowed out of
credit sales receipts closed during the period, and sales tax
filings and payments for mail/phone/fax and Internet order sales
may automatically be filed on behalf of the merchant by the escrow
agent on a schedule and as required by each of multiple
jurisdictions. In addition to escrowing sales tax from credit or
debit card orders for mail/phone/fax and Internet sales, by using
the method described above for cash receipts, sales tax may also be
escrowed for orders made for example using a personal check, money
order, bank check, travelers check, gift check, gift certificate,
cash or any other financial instrument used as cash. Future tax
liabilities (for example, for Internet sales initiated outside of a
merchant jurisdiction) may be easily accommodated by the method and
reflected in modifications to the merchant's order and delivery
tracking software.
As is described further herein, the present method may also be used
for collecting other taxes, liens, garnishments and levies that may
be imposed on a merchant by state and/or federal government
agencies. For example, the method may provide for adjusting the
rate of sales tax collection in order to address back taxes. In
this manner, a merchant may for example reimburse a state sales tax
authority for back taxes owed at a manageable rate, until the back
taxes are repaid. For example, in a case where taxable sales
receipts are taxed at a rate of 6%, the escrow rate may be adjusted
upward (for example, to 16%) in order to collect against back sales
tax owing. In the present provisional patent application, it is
contemplated that the method could be applied to virtually any
application in which a merchant desires or is otherwise required to
effect a withholding of funds collected from .[.credit-bases.].
.Iadd.credit-based .Iaddend.sales transactions, and for payment of
escrowed merchant funds to any legitimate payee (for example,
local, state and federal tax authorities, judicial authorities, and
payees who have received legal judgments against a merchant). For
example, in addition to the applications previously disclosed, it
is contemplated that the method could be applied to generate
merchant escrow funds for paying back payroll taxes or back real
estate taxes, or for effecting a merchant savings account (in the
latter case, the payee of funds escrowed would be the
merchant).
It is also contemplated that the present method may be used for the
purpose of creating multiple escrow funds simultaneously. For
example, the merchant could specify more than one escrow rate each
to be applied to one or more classes of eligible sales
transactions. Preferably, the merchant terminal would be programmed
for entry of such rates, and for reporting of the rates and
associated merchant and transaction information to the EFP and
escrow agent. The reported information would preferably and as
applicable identify authorities and/or parties to whom associated
escrowed funds would be disbursed at specified rates and schedules,
and include conventional secure means for the merchant to authorize
these transactions to begin and/or to end (for example, by digital
signature). Optionally, for example for payments associated with
legal judgments, such secure authorization means may be extended to
other parties.
An important function of the present invention is to provide
information about escrowed funds to the merchant, and to each tax
jurisdiction in which sales tax receipts are being filed. As
described herein, escrow account information can be provided at the
merchant terminal at the time of a close out in a form, for
example, similar to the sales draft created by the terminal in
response to each sales transaction. In addition, the present method
contemplates escrow account management software periodically used
by the escrow agent, for example, to report a monthly summary to
the merchant, and/or to prepare a filing return for filing tax
receipts in a tax jurisdiction. If one or more types of funds are
being escrowed, the monthly summary to the merchant may for example
report the following information for each type: a) escrow funds
collected over a current closeout period, and cumulatively for a
designated number of prior closeout periods, b) escrow funds paid
for a current payment period and cumulatively for a designated
number of prior payment periods, and c) balance of funds owed (if
the fund type relates, for example, to back taxes or other
obligations not relieved in a single payment period).
The escrow agent may for example provide a secure web site for
presenting escrow account information to the merchant and/or other
payees (for example, the tax authorities). Alternatively, the
escrow agent may physically or electronically transmit (for
example, by e-mail, facsimile or other e-commerce means) escrow
account information on a periodic basis directly to the merchant
and/or payee.
Additional applications of the method beyond state sales tax
collection for account transactions include any and all taxes which
can be paid or charged at a point of sale (for example, Value Added
Tax or VAT).
Summarizing, it is an achievement of the disclosed system and
method that only the charges for goods/services and not the
separate tax portion are transferred to the merchant's account--and
the appropriate tax amount is transferred to an escrow account held
by the bank who has the transfer relationship with the business
owner. This escrow amount would be paid monthly or quarterly, for
example to the state where the business transaction took place
easily, speedily and accurately.
EFT systems are well known architecture. The software logic for
deducting a certain percent of gross sales is also known as banks
utilize it to take their fees. A system for filing tax money with a
state is also known since banks regularly make tax payments for
corporate clients. Yet none of the these systems presently offer
advantages described in conjunction with the disclosed method.
Many present EFT systems provide effective security, for example
such as encryption, as for moving money between accounts. The
disclosed method contemplates a secure web based account available
to the merchant that enables the merchant to check the status of
their account with the escrow agent. In addition, as an alternative
to cash transaction reporting, a web-based account may be provided
to allow communications between the EFP and the merchant with
regard to cash transactions.
The disclosed method may be used to exempt purchases made outside
of a prescribed jurisdictional tax base. Alternatively, The method
may be applied for multiple jurisdictions, for example, on a
state-by-state level and/or national level. The method may also be
applied to extract a service fee applied by the EFP.
The system and method can be customized to address any tax
collection that involves tax liens and levies used by the State and
Federal Government to collect back taxes from businesses. For
example, many small and large businesses fall behind on taxes for
any number of reasons and paying back taxes becomes very difficult
and expensive for merchants because of penalties and interest and
because businesses rarely have large chunks of excess funds to pay
back taxes. The collection of back taxes by State and Federal
Governments is also a difficult and expensive job because it
involves manpower.
The disclosed method can be utilized by a state or federal
government to levy a business for back taxes. For example, suppose
a business owes back sales tax to the state. The state sales tax is
6%, but the state would levy the account 16% each month and collect
an additional 10% towards back taxes until the debt was paid. In
this case, the EFP and escrow agent would employ the disclosed
method to act as the collection agents for the state or federal
government, thereby cutting the state's collection costs and
allowing the merchants to continue operating without extreme
economic harm to their business. The method may also be used by
collection companies to collect monies toward judgments won against
businesses.
The disclosed system and method may be applied broadly in
e-commerce. For example, sales tax may be charged on all e-commerce
sales, to be collected in the state in which a sale takes place,
analogous to catalog sales today. As the majority of e-commerce
sales and catalog sales are credit card transactions, the method
provides an sound basis for impounding escrow funds from e-commerce
sales.
The disclosed method may also be used by small businesses to
provide a forced savings plan. Many small businesses are S
corporations with profits flowing through to the officers as
income. To boost this income the EFP could offer to provide an
additional debit to be moved into a savings account for the
corporation. Many small businesses lack the discipline to save
small amounts of money over time, a proven method of saving money.
If the EFP offered the disclosed service to deduct an allocatable
percentage from each transaction and funnel it, for example, into a
bank-managed sayings account digitally for the business, a whole
new avenue of income is provided for the bank.
A schematic diagram is provided in FIG. 1 illustrating elements of
the method, which are described as follows: 1. The customer making
a purchases presents a credit or debit card at the point of sale.
2. The merchant uses an electronic terminal or the telephone for
example, to request an authorization from the credit/debit card
provider/issuer via the EFP (depicted in FIG. 1 as a "merchant
bank"). 3. The merchant bank issues a payment authorization and
request message to the card issuer that includes details about the
account and the transaction, including escrow account transaction
signals. This message may also be forwarded to the escrow agent. 4.
The credit/debit card issuer reviews the authorizationrequest,
makes a decision to approve or decline it, and replies to the EFP.
The issuer may also forward the reply to the escrow agent. 5. The
EFP forwards the issuer's reply to the merchant. The response can
also include information to decline, approve, and push escrow
account information to the escrow agent.
It is foreseeable that in some cases, when a credit/debit card
issuer is unavailable for authorization, the EFP may authorize the
escrow account transaction as a part of a stand-in processing
service.
The method may also be utilized by Independent Sales Organizations
or ISOs. Independent sales organizations play a role in many
business fields. In the credit card industry, ISOs act as a third
party between the merchant and the acquiring bank. Many businesses
are unable to obtain merchant status through an acquiring bank
because the bank views them as too large a risk, and need to go
through an ISO to obtain merchant status. Merchant status is
activated when a business has authorization from an acquiring bank,
ISO, or other financial institution to accept credit cards. Such
status is required in order for the merchant to practice the
disclosed method.
A variety of service providers may be selected to serve in the
roles of EFP and escrow agent (for example, First Data, Telecheck,
and Paymentech). In addition, a variety of credit card processing
services such as EMS Nationwide, First of Omaha, First USA,
Paymentech, First Union--Merchant Sales and Services, Nova
Information Systems, Vantage Services, MasterCard, American
Express, Discover, Worldwide, Citibank, First USA/BANK ONE, MBNA,
Discover, J. P. Morgan Chase, Bank of America, Capital One,
Household Bank, Providian, and Fleet may also serve in one or more
of these roles.
FIG. 2 provides another view of the disclosed method.
A credit and data feed as shown in box 1 interlinks with a bank
network (EFP) as shown in box 2. Charges are received by the EFP as
shown in box 3. The EFP debits a fee percentage, and remits the
balance to the merchant's bank account, as shown in box 4. At the
same time, the EFP debits an allocated tax amount for a retailer's
gross credit card receipt, and makes an escrow account deposit to
the escrow account as shown in box 5.
The EFP and/or escrow agent may, for example, use several pricing
models to derive revenues from the escrow account services and
functionality provided. A first approach is for the EFP and/or
escrow agent to charge based on a percentage figure of the overall
value of escrow account transactions. A second method is to charge
a flat fee for every escrow account transaction regardless of
dollar amount. A third approach is for the PSP to charge a
transactional fee based upon the volume of escrow account
transactions processed.
The foregoing describes the invention in terms of embodiments
foreseen by the inventor for which an enabling description was
available, notwithstanding that insubstantial modifications of the
invention, not presently foreseen, may nonetheless represent
equivalents thereto.
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