Stripe has launched a solution to assist companies in managing tax compliance. Stripe Tax Above all, it will help you automatically calculate and collect sales tax, value added tax (VAT), and goods and services tax (GST) in more than 30 countries.
Stripe Tax makes all aspects of global sales tax management a breeze. Automate the calculation and collection of taxes for transactions in Stripe, tell companies where to collect taxes, and create comprehensive reports for easy tax filing.
The complexity of tax compliance
For years, help with tax compliance has been a top request from Stripe users. Tax compliance has become increasingly complexAs digital and physical products are taxed in more than 130 countries and in more than 11,000 different tax jurisdictions in the United States alone. In addition, on July 1, 2021 in the European Union there will be a change in VAT regulation with the appearance of the single window.
The tax rules in each jurisdiction are frequently updated and often vary based on subtle details. For instance:
- The tax rate for tickets for the same webinar varies significantly depending on the location of the ticket holder, whether it is a live or recorded version, and whether the buyer is an individual or a company.
- In the UK, pet food is not subject to VAT, unless it is pet food.
- Cowboy boots are not taxed in Texas, but hiking boots are.
- Businesses face significant opportunity costs in complying with regulations, but also in maintaining a compliant configuration around the world. As a result, two-thirds of companies say that managing compliance with tax regulations slows their growth, and most say that it would launch more products and expand to more countries if it were freed from this burden.
The companies that do not comply with regulations face legal and financial risksas national governments around the world increase penalties for late or inaccurate declarations. In the US, businesses face an average 30% interest for back sales tax.
How Stripe Tax works
Stripe Tax radically simplifies tax compliance for businesses in more than 30 countries. Features include:
- Real-time tax calculation: By determining the exact location of the end customer and matching it to the product or service being sold, Stripe Tax always calculates and collects the correct amount of tax, and stays up-to-date with changes in rates and regulations so companies don’t have to to do it.
- Frictionless payment: B2C businesses can reduce payment friction with Stripe Tax, using location information to calculate and display taxes in a way that is most familiar to their customers.
- Management of tax identification: For B2B businesses, Stripe Tax collects the tax identification number of customers, and automatically validates VAT IDs for European customers, applying a reverse charge or a zero VAT rate when necessary.
- Conciliation: Stripe Tax saves companies the hassle of reconciling thousands of transactions by creating comprehensive reports for each market in which a company is registered to collect taxes, speeding up filing and referral.
Instead of taking weeks of work, all of this can be done automatically by adding a single line of code or updating a single setting in the control panel Stripe of a company.
“No one jumps out of bed in the morning excited about having to deal with taxes“, said John Collison, Co-Founder and President of Stripe. “For most companies, managing tax compliance is a painful distraction. We simplify everything related to the calculation and collection of sales taxes, VAT and GST, so that our users can focus on building their businesses.“
Large-scale, global companies 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, NewsUK Subscription Platform Director, said: “The direct integration of Stripe Tax into our subscription platform will save us countless hours, time that we can better spend on other things“.
Ben Orenstein, Co-founder of Tuple said: “As a small business, we want to spend as little time as possible thinking about the tax collection allowed by law. We are happy to let Stripe Tax do the heavy lifting for us.“