Preheat your oven to 350°F (175°C). Line two baking sheets with parchment paper and set aside.
In a large mixing bowl, beat the butter and sugar with an electric mixer until light and fluffy.
Add flour, baking powder, and salt. Mix until the dough begins to come together.
Add milk and vanilla extract and beat until the dough forms a soft ball.
Chill the dough in the refrigerator for 15 to 20 minutes to make it easier to roll.
On a lightly floured surface, roll out the dough to about 0.25-inch thickness.
Use a round cookie cutter to cut out circles, then use a smaller cutter or bottle cap to punch out the center to create a donut shape.
Place cookies on prepared baking sheets and bake for 10 to 12 minutes, or until the edges are lightly golden. Allow to cool on a wire rack.
Spread shredded coconut evenly on a clean baking sheet. Toast in the oven at 350°F (175°C) for 10 minutes, stirring frequently, until golden.
In a small saucepan, melt the caramels with 2 tablespoons milk over low heat, stirring constantly until smooth.
Remove from heat and mix in the toasted coconut.
Spread about 2 teaspoons of the coconut caramel mixture on top of each cookie. Let set for 10 minutes.
Melt chocolate chips using a double boiler or in the microwave in 30-second intervals, stirring between each.
Dip the bottom of each cookie into the melted chocolate and place chocolate side down on parchment paper.
Use a fork or piping bag to drizzle more chocolate over the tops of the cookies.
Allow cookies to set completely at room temperature or in the refrigerator for about 15 minutes before serving.