How Do I Manage Refunds in ShipCompliant?

If you are using the ShipCompliant integration, all Commerce7 orders (except 'carry out orders' which are optional) will automatically flow to ShipCompliant. Depending on your configuration, those orders might also automatically flow to your fulfillment provider. For more information on the ShipCompliant integration and setting it up in Commerce7, please read our documentation on Connecting ShipCompliant.

When you refund an order in Commerce7, a new order is created with the negative quantity. This negative order also flows to ShipCompliant.

The reasoning here:
If SC was only used for compliance (take fulfillment out of the equation) then Commerce7 is doing the right thing for reporting.  You charge an order, you charge tax, you send it to SC.  You refund it, you refund tax, you send it to SC.  If the order falls over a month end, you charge an order in Feb, you remit tax for Feb and then in March you refund, in March you claim a tax credit.  This is best practice for accounting and why we have set this up this way.
If you are configured to have orders flow automatically to fulfillment it becomes a bit tricky. Sometimes you might want a refunded order fulfilled and sometimes not. Additionally, there is no way to stop an order from going to fulfillment (that's part of the SC/Fulfillment integration).   
At this time, your workflow should be to clearly communicate with fulfillment to let them know whether or not the original order requires shipment (in some cases there might be a partial return or full return of product).

We do not recommend deleting orders in ShipCompliant.