ALEKSANDRA BAL: Good afternoon, everyone. How many of you are selling to customers in more than one country? Probably quite a few, right? And this lines up with what we see in the data. According to a recent Stripe survey, 84% of businesses sell to multiple markets. And it's not just large corporations; 81% of sole proprietors do the same. The takeaway? Global expansion isn’t for the big players anymore. Businesses of all sizes are making it a reality, right from the start. 

But there is a catch. Small businesses face the same tax complexities as large companies when they go global. But they don’t have a big tax team to handle them. Before we launched Stripe Tax in 2021, we found out that 20% of Stripe users weren’t charging any tax at all. While this might work in the early days, it’s definitely not a sustainable strategy as your business grows. So we set out to change this by turning complex tax rules into an actionable solution with Stripe Tax. 

In today’s session, I will walk you through four key factors that shape tax compliance obligations for businesses like yours. Next, we’ll give you a quick preview of how Stripe Tax simplifies tax compliance. And finally, we’ll hear from one of our users how they navigate the choppy waters of global tax compliance. So let’s dive in. 

Taxes may seem complex and daunting at first, but a lot of this complexity comes down to four key factors: your business type, where you and your customers are located, who you sell to, and what you sell. We are going to take a closer look at each of these factors, and we’ll start with the business type. And here comes our first trivia question: so every year I put together a tax quiz for our product and engineering teams at Stripe. We are actually meeting in Dublin next week, so I thought I would test a few questions out on you first. And this is our first question: is it possible to sell digital banana emojis across the US and [not] charge any tax at all? 

Now, before I reveal the answer, let me provide some context. Tax laws were originally designed for simple transactions, one seller and one buyer. But currently we are using platforms and marketplaces for almost everything from booking travel, buying groceries, to supporting local artists. Unfortunately, what qualifies as a marketplace for tax purposes and whether that marketplace has to collect tax varies by country and state. Factors like who facilitates the payment, who sets the price, who fulfills the order—they all come into play. And once you understand these nuances, you may reconsider how you operate or even how your product is structured. So back to our quiz. The right answer here is D. If you sell digital banana emojis on a marketplace and that marketplace collects tax, you, the business owners, don’t have to collect it. 

Let’s move on to the next factor: location. And our next quiz question—this one is easy, it’s true or false, so you have 50% chance to be right. And the question is, is it possible to apply different tax rates when you sell the same product to different customers on the same street in the same city? So the same product, the same street, the same city. What do you think? Yeah, it’s possible. 

One location where this actually happens is Drexel, Missouri. So in Drexel the tax [run] can change depending on which side of the street your customer lives on. And this Drexel example is not unique. In the US, sales tax rates don’t just vary by state. They can change by county, city, district, and even the street. We have in total 13,000 taxing jurisdictions across the country. That’s a lot. And you are probably all familiar with the famous Wayfair ruling which allows states to require online sellers to collect tax even if those sellers don’t have a physical presence in the state. This means that you may have tax compliance obligations everywhere your customers are located. Think again, 13,000 taxing jurisdictions, 13,000 different tax rates. 

And to manage this complexity, it’s not enough to know where the location boundaries of these 13,000 jurisdictions are. You also need to keep up with changing tax rules. Last year, there were over 600 tax rate changes across the country. And just last month, over 100 tax rate changes went into effect in California alone. Outside of the US, if you are dealing with VAT, value-added tax, or GST, goods and services tax, things may seem simpler at first. VAT rates are set at the national level, so not by states, counties, or cities, and they do not change as often as tax rates in the US. 

But that simplicity can be deceiving. Take Indonesia, for example. On the last day of last year, the Indonesian government suddenly cancelled a planned January 1st VAT rate increase only four hours before it was set to take effect, and they framed it as a New Year’s gift for the Indonesian people. We all love unexpected tax gifts, right? And last December, Canada introduced its first-ever tax holiday, temporarily exempting basic necessities and items that bring joy to the season. What do you think brings joy to the season? According to the Canada Revenue Agency, these are Christmas trees and game consoles. They all bring joy to the kids, that we know for sure. So collecting the right amount of tax in the right place can be challenging. That’s why we’ve built Stripe Tax. My team keeps track of all the changing tax rules so that you don’t have to. 

And now let’s move to our next factor: customer profile. This refers to who you sell to, a business or an individual. And our next quiz question: if you, a US business, sell digital subscriptions to a business based in Germany, do you have to collect any tax? And the right answer is no, your customer will handle this. So cross-border B2B sales are often taxed differently from B2C sales. In most cases, they are tax-free for the seller. It’s the buyer and not the seller who’s responsible for tax collection. We call this process reverse charge. And for reverse charge to apply, you just need to collect the buyer’s tax ID number to confirm that they are a business. Now, in the US, things work differently. We don’t collect any tax ID numbers here, but the tax rate on certain digital products can depend on whether you purchase this product for personal or for business use. 

Now, let’s move on to our final factor, product type, and our final, the best one, quiz question: does the UK apply the same VAT rate to two little cute animals, rabbits and guinea pigs? What do you think? And the right answer is there is less tax on rabbits because you can eat them. They are delicious. So in the UK, they consider rabbits food while guinea pigs pets. Food and pets are different, so you can apply different tax rates. So if you sell physical goods, you need to think not only about inventory locations, fulfillment methods, import taxes, but also about less obvious things like local eating habits, because of course the answer to these questions could be different if we’re talking about a different country, not UK, but India, Peru, or Indonesia. 

If you sell digital products, you may have tax compliance obligations in over 100 countries and 30 US states. The tricky part here is that what counts as a digital product is not consistent, it varies by country and state, and it can depend on how the product is delivered, whether it’s a subscription, streamed, or downloaded. In short, while your product can live in the cloud, your tax compliance obligations are grounded in the fine print. 

So how to ensure that we apply the right tax treatment to our products? When we were building Stripe Tax, we wanted to create an intuitive and easy-to-use product code system. We took a huge range of products and simplified them into clear categories. And while doing so, we had many interesting discussions. For example, is an online cooking class education or entertainment, or how to describe toilet paper in less than 30 words in a way that resonates across cultures? The result is a straightforward system where you just need to select a category that fits what you sell, no tax expertise needed. 

As you have just seen, taxes can be fun and complex, but managing tax compliance doesn’t have to be difficult. Now, I would like to invite my colleague Dan, who is the head of Stripe Tax Engineering, to show you how tax compliance can be made simple with Stripe Tax. 

DAN CONTI: Tax can be overwhelming, as we kind of established. At the same time, it can’t be ignored. Tax compliance is a necessary part of your business. When we looked at this with Stripe Tax, we realized we needed to take all of this complexity, all of the fragmented policies and rules around tax, and distill them into an easy-to-use product that could be a seamless part of your business. We decided we needed to solve the end-to-end solution, not just the process of collection, but addressing how to monitor your obligations, how to help you with registration, calculation and collection, and, in the end, filing. 

Let me show you how this works. The first step is you can monitor your obligations. Who here is a Stripe user? Awesome. And how many of you have checked your tax obligations? Okay. It’s really easy to do. Simply log in to the Dashboard, you can go to the tax area. From here you can click on the thresholds tab, and then we’ll show you a view of all of the places where you’re currently doing business. We’ll show you what the thresholds are for each region, where you’ve exceeded, and where you may have upcoming tax obligations. It’s easy to do, and this is available to all Stripe users whether or not you signed up for Stripe Tax. 

Next, if you’ve exceeded a threshold, you may need to add a registration. We made this process easy. It can vary by country and state, by different jurisdictions, there can be different information that you need to provide. We translated this into a simple step-by-step process where we ask you just for the information we need, we leverage information we already have from past interactions with you and your business, and then we provide the status directly here so you can track the progress of your registration as it goes forward. In addition, we work with partners for registrations outside the US to deliver the same quality of experience. 

Now that you’ve registered, it’s a good opportunity to make sure that we’re collecting taxes accurately on your behalf. When you first create a Stripe account, you provide your business address and you provide a tax category. It’s a good moment to check these. For example, when you first set up, you may have said that you’re doing electronically supplied services, but as your business has grown, you may know that you’re actually doing live virtual training services. This level of precision will help us ensure that we collect the right taxes for you and set the right foundation for your business. 

After you’ve calculated and collected, don’t forget to file and remit. Stripe Tax works with trusted partners such as Taxually, HOST, and Marosa to ensure that your tax filings are accurate and timely. And you can track the status of your filings directly in the Dashboard. From here, you set the right foundation for your business. As you add the next product or you want to sell in the next location, it’s a nonissue. We leverage all of the work that you’ve done today, and we can make it easy for you to launch that new product or to scale into a new market. 

Companies from OpenAI to Keap leverage Stripe Tax to achieve tax compliance at scale. These are just some of the examples. One of our customers, one of our earliest Stripe Tax customers, Thinkific, builds a SaaS platform for digital content distribution for educational materials. I’d like to welcome Tessa Barnett on stage to talk a little bit more about their experience with Stripe. 

Tessa, thanks for joining us today. We really appreciate it. Just talking about the journey with Stripe Tax, can you help us learn a little bit more about, how did your approach to tax compliance evolve? How did it start? 

TESSA BARNETT: Yeah, and thanks, Dan. It’s really great to be here. When you’re building a business, like many of you in this audience probably are, you need to be laser-focused on growth, product-market fit, revenue, and serving your customers’ needs. You likely don’t have the time or the resources to be worrying about tax compliance, let alone the desire to. And for Thinkific, as a business that helps our customers sell digital learning products, we heard this a ton from our customers. 

And at the same time, we realized that we were effectively becoming a platform, facilitating thousands of taxable transactions, often across borders. And that raised red flags from a compliance standpoint, and also from a customer trust perspective. So the combination of risk and opportunity was what drove us to look for a solution like Stripe Tax to help us automate what we couldn’t easily do at scale. And now, today, it’s not just about risk mitigation for us. It’s part of our value proposition for our customers: sell internationally without worrying about tax rules. And that’s really powerful. 

DAN CONTI: Amazing. I think many people can relate to the growth phase of the company as you’re trying to build. As you recognized you needed to invest in tax, what are a few things you did internally to get started? How did this differ from other projects? 

TESSA BARNETT: We took a look at where our key users were and what the tax rules were in those major jurisdictions, and then we brought together a core team from finance, payments, product, and engineering. And that was probably about when we realized that it wasn’t going to be your regular build or integration, because we now had finance folks weighing in on design and user experience decisions. We had finance people coming in saying, “Well, I need to collect these two or three data points for businesses coming from the EU,” to Alex’s point about the reverse charge mechanism. And then the design or product manager would say, “I don’t want to do that. That’s going to add two steps at checkout. That’s a terrible user experience.” So it was a fun kind of hurdle for those teams to learn to speak each other’s language. So I would say that having product and finance work together early on to figure out the design requirements up front is important. 

DAN CONTI: Yeah, a different type of collaboration just to get going. What do you wish you would have known up front as you started on your tax journey? 

TESSA BARNETT: Building trust with your customers is probably the most important thing, because with tax, it just has to be accurate, and people get really annoyed if it’s not, for valid reasons. So it’s twofold. For Thinkific and our customer base, we needed our customers to trust that we were going to get this right, and we also needed to be able to trust Stripe as our sales tax service provider to get this right for us. 

With our customers, what we kind of learned and iterated along the way was that the messaging to our customers via support articles, how the solution works, where they can get support—and we’re lucky we have a really great support team—and specifically what kind of information to provide to, say, their tax accountant. We would, oddly enough, have feedback that the tax accountant would say, “Oh, don’t worry about sales tax. You’re in the digital business, and digital goods aren’t taxable.” And that might have been the case 20 years ago, but that definitely is not the case today. You need to know typically where your buyer is coming from and additional information before you can make the assessment. We also worked really closely with the Stripe Tax Research team to build out, we did a webinar, we did joint customer articles, just to really showcase that partnership and build the trust with our customers. And then on the Thinkific-to-Stripe side of things, it was really important to us to work closely with the Stripe Tax Research team to make sure that we understood how it worked so that we could trust that it was gonna get it right. 

DAN CONTI: Absolutely, I mean, you started on Stripe Tax so early that it really was a partnership as we were building out the product. How did you choose Stripe Tax? 

TESSA BARNETT: Yeah, when we set out, we kind of had three main decision criteria. The first was around, is the solution going to scale with our customers? No matter what type of product they sell, it needs to be able to work for them. Second, is this going to integrate easily with our existing payments tech stack? That was important. And third, do we trust that Stripe Tax is going to invest in this solution? Taxes are complex and they change. It requires a lot of investment. So for us, Stripe Tax really ticked those three boxes. 

DAN CONTI: That’s awesome. And that integration with your existing business is such a huge point too. Aside from avoiding compliance penalties and those things, have you noticed other benefits that come from being tax compliant? 

TESSA BARNETT: Yeah, we have actually. When we’re kind of expanding the service that we’re providing to our customers, we’re expanding the level of value that they get by providing services around tax assessment, collection, remittance, and that’s valuable for our customers. So we actually monetize on that. We charge a higher percentage of what our customers sell, for the customers who are on our sales tax solution, so that’s a benefit to us. We also have seen that larger customers will typically, our platform will be more appealing to them because those larger customers have more advanced billing needs and expectations, and they want assurance that we’re going to handle it for them. So building that trust and confidence with our customers is really powerful. 

DAN CONTI: I love that you’ve moved from tax being this new thing that’s potentially intimidating to getting to compliance, and now it’s actually a growth opportunity for the business. 

TESSA BARNETT: Yeah. 

DAN CONTI: For where you’re at now, how many people at Thinkific work full-time on tax? 

TESSA BARNETT: Yeah, that’s a funny one. When we first started building this solution, we actually assumed that we were going to need a dedicated tax team to manage this, manage all of the support for our customer base, manage the compliance, and from talking with others in the industry, we thought we might need three or more people on tax. And as we iterated through the messaging, building that trust, and making the solution as self-service for our customers and for us as we could, we found that that wasn’t actually the case, and now we have less than half of an FTE working on tax.

DAN CONTI: Tessa, thank you so much for sharing your experience. It’s inspiring to hear what Thinkific has been able to accomplish. Really appreciate your time. 

Folks, that’s all we have for today. Thanks so much. Appreciate it.