I'm trying to understand how Magento manages Recurring Profiles and orders associated with them.
I have some open questions about that:
Order:
- How the subsequent "order" is created from a Magento merchant perspective? First-order is placed by end-user, What happens for subsequent schedules?
Invoicing:
- How is the setup of the invoice? Do the invoices go to the customer directly from Magento?
- What is the impact on re-ordered items for invoices?
- How taxes are managed?
Best Answer
TL;DR:
For recurring profile - orders are generated by Magento after a notification from Paypal, taxes are stored as line-items are are charged in accordance with your store's tax rules, based on the original order. Invoices happen automatically and no action is required from the customer.
There are two ways of performing 'recurring' payments via Magento:
Billing Agreements
A billing agreement in Paypal is a means of storing a token, or a billing agreement, in order to generate orders from it. The customer has authorized that you may store the information and you may create orders on-demand. This does not happen automatically, however, but either an admin or the customer themselves may generate sales orders without having to re-enter payment information.
If you wish to be in control of how and when items are billed every month, Billing Agreements are an easy way of maintaining this.
Any of the above could be considered positives or negatives, depending on how hands-on you are with your store.
For more information -
http://www.magentocommerce.com/knowledge-base/entry/setting-up-billing-agreements-through-paypal
Recurring Profiles
http://www.magentocommerce.com/knowledge-base/entry/working-with-recurring-profiles
First, a few drawbacks -
Paypal tokenizes the credit card and, when used with your store's API key, allows you to charge the customer without the card being present. This token is called a 'reference transaction' and expires after a maximum of 365 days. I'm not sure how this works in a standard Paypal Express store, but a Website Payments Pro account needs the feature enabled by their customer service team before you can use it.
The order is entered by Magento, in response to a Paypal IPN that the funds were charged. New orders and invoices are generated.
More information
Some information was sourced here:
http://lewisbrian.hubpages.com/hub/Effectively-Working-with-Recurring-Profiles-in-Magento
Tokenization / billing agreements:
http://en.wikipedia.org/wiki/Tokenization_(data_security)
https://www.paypal.com/helpcenter/main.jsp;jsessionid=4Tc2KhVVj1Q0gfK1RR8GNGSGptqQPH2zqMgyKzbpTvpTwVkprGnh!9559953?t=solutionTab&ft=homeTab&ps=&solutionId=163218&locale=en_GB&_dyncharset=UTF-8&countrycode=GB&cmd=_help&serverInstance=9002
Recurring payment profiles in Paypal Express:
https://www.paypal.com/cgi-bin/webscr?cmd=xpt/Marketing/general/RecurringPaymentFAQs-outside#Q9
Magento Recurring Profiles:
http://www.magentocommerce.com/knowledge-base/entry/working-with-recurring-profiles