Stripe has launched a new tool that will automatically calculate and add VAT or sales tax to payments.
Called Stripe Tax, it is the first major product built primarily from the company’s growing Irish engineering hub.
It will apply to all US states, as well as in Europe and internationally in countries such as Australia.
The company says tax calculation has been its most requested feature from customers.
“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 like a migraine that never goes away, Stripe tax is the Aspirin for that tax headache. We simplify everything about calculating and collecting sales taxes, VAT, and GST, so our users can focus on building their businesses.”
The feature works by matching a customer’s location with the product or service being sold.
It then figures out what the correct sales tax should be and applies it.
It will also validate VAT IDs for European customers, applying a reverse charge or zero VAT rate when required.
The feature will be charged on a percentage basis, based on when it is used.
Typically, producers and services can have vastly varying sales tax rates in adjacent countries and US states.
In Denmark, e-books attract a 25pc Vat rate; in the Netherlands, it’s 9pc.
The sale of up to €35,000 of goods in Austria requires no registration for Vat, whereas in Spain, it’s liable no matter how little you sell.
In the US, states can vary the rules even more subtly. As Stripe points out, cowboy boots aren’t taxed in Texas, but hiking boots are.
Stripe says that instead of taking “weeks of work”, the tax calculations “can be done automatically by adding a single line of code or updating a single setting in a business’s Stripe Dashboard”.
In May, Stripe announced the acquisition of TaxJar, a provider of sales tax software for internet businesses in the US. Stripe Tax integrates directly with TaxJar, the company says, allowing users to more easily file their taxes.
The company says that, combined, the Stripe Tax and TaxJar teams will work together “to enable any business to sell any product or service globally with associated tax compliance fully automated”.
“As a small company, we want to spend as little time thinking about tax collection as we can legally get away with,” said Ben Orenstein, co-founder of the macOS app, Tuple, who has been trialling the product. “We’re thrilled to let Stripe Tax handle the heavy lifting for us.”
The countries covered by Stripe Tax include Australia, Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, New Zealand, the Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, the United States and the United Kingdom.