# Refund Processing
Orderwave will calculate and set up refunds for you. You can configure Orderwave to automatically and process refund transactions for returned merchandise and canceled items, or you can process the refunds manually, if you prefer to review each refund before it is processed.
# Refund calculation
Refunds are calculated based on the amounts of the prior charge. For example, if an item is charged $59.99 in a previous charge, and later returned, Orderwave will calculate that refund in full. You can customize this logic using Rules.
# Shipping refund calculation
Shipping charges are not included in refunds by default. If you want shipping charges to be refunded, the billing bucket oms/billings on the order (or the entire order oms/orders) should be tagged with the tag Shipping-Refundable. This is a built-in tag in Orderwave, and instructs Orderwave to include shipping charges in the refund calculation. This gives you the flexibility to conditionally offer refunds on shipping using your business rules.
# Shipping refunds on canceled items
If you have captured payments on canceled items, the billing or order is tagged with Shipping-Refundable, and all of the items have been canceled on the order, shipping will be refunded.
# Refund processing flow
Refunds follow this flow for refund processing:
| Step | Description |
|---|---|
| Returned merchandise or item cancellation | The billing buckets on the order are placed in the SCHEDULE-REFUND queue. This queue is a process queue for a later process to work through these billing records and calculate and set up the refund amounts to process. |
| Calculation and scheduling | The refunds are calculated and created as scheduled refunds (you can see these as pending payments), and placed in the REFUND queue. An automated task (App Job) will automatically process these refunds against the merchant account. |
# Processing on locked records
Refunds will still be processed on locked billings and orders. This is because when orders are canceled, their order, shipment, and billing components get locked, but refunds still need to occur. If you need to stop automatic refund processing on certain billings, make sure to use a rule to set the billing to enabled = false. Billings that are not enabled will not have their refunds automatically processed.