Stripe, the technology company building economic infrastructure for the internet, has announced the launch of Stripe Tax to help businesses automatically calculate and collect sales tax, value-added tax (VAT), and goods and services tax (GST) in over 30 countries.
Stripe Tax makes every aspect of global sales tax handling as frictionless as the rest of Stripe. It automates tax calculation and collection for transactions on Stripe, tells businesses where they need to collect taxes, and creates comprehensive reports to make filing taxes easy.
The complexity of tax compliance
For years, help with tax compliance has been a top request from Stripe users. Tax compliance has become increasingly complex, with digital and physical goods now taxed in over 130 countries, and over 11,000 different tax jurisdictions in the US alone.
Tax rules in each jurisdiction are updated frequently and often vary based on subtle details. For example:
- The tax rate for tickets to the same webinar vary significantly depending on the location of the ticket holder, whether it’s a live or recorded version, and whether the purchaser is a private individual or a corporation
- In the UK, food for animals is not subject to VAT, unless it’s pet food – Cowboy boots aren’t taxed in Texas, but hiking boots are.
Businesses face significant opportunity costs in becoming compliant, but also maintaining a compliant setup globally. As a result, two-thirds of businesses say managing tax compliance holds back their growth, with a majority saying they would launch more products and expand into more countries if relieved of the burden.
Non-compliant businesses face legal and financial exposure as national governments around the world increase penalties for late or inaccurate filings. In the US, businesses face an average 30% interest charged on past-due sales tax.
How Stripe Tax works
Stripe Tax radically simplifies tax compliance for businesses across more than 30 countries. Features include:
- Real time tax calculation: By determining the end customer’s precise location, and matching that to the product or service being sold, Stripe Tax always calculates and collects the right amount of tax, and keeps up to date with rate and rule changes so businesses don’t have to. – Frictionless checkout: B2C businesses can reduce checkout friction with Stripe Tax, by using location information to calculate and show taxes in the most familiar way to their customers.
- Tax ID management: For B2B businesses, Stripe Tax collects the tax identification number from customers, and automatically validates VAT IDs for European customers, applying a reverse charge or zero VAT rate when necessary.
- Reconciliation: Stripe Tax saves businesses the pain of reconciling thousands of transactions by creating comprehensive reports for each market in which a business is registered to collect tax, speeding up filing and remittance.
Instead of taking weeks of work, all this can be done automatically by adding a single line of code or updating a single setting in a business’s Stripe Dashboard.
“No one leaps out of bed in the morning excited to deal with taxes,” said John Collison, co-founder and president of Stripe. “For most businesses, managing tax compliance is a painful distraction. We simplify everything about calculating and collecting sales taxes, VAT, and GST, so our users can focus on building their businesses.”
Highly scaled and global businesses like NewsUK, as well as fast-growing internet startups like Tuple and Routetitan, can use Stripe Tax to simplify their tax compliance across multiple products and geographies.
Ruan Odendaal, Head of Subscriptions Platform at NewsUK said: “Directly integrating Stripe Tax into our subscriptions platform will save us countless hours—time that can be better spent elsewhere.”
Ben Orenstein, co-founder of Tuple said: “As a small company, we want to spend as little time thinking about tax collection as we can legally get away with. We’re thrilled to let Stripe Tax handle the heavy lifting for us.“