If you’re looking for automated tax calculation where you don’t need to define the rates, use Stripe Tax.
When applying tax rates, Stripe calculates the total tax amount per tax rate, and summarizes it in a table that you can export into tax summary reports.
Creating tax rates
If you’re working with a small number of tax rates, you can manage and create them in the Dashboard. After creating tax rates, you can apply them to invoices, subscriptions, and one-time payments or subscriptions created through Stripe Checkout.
Create a catalog of tax rates that meet the requirements for the jurisdictions that you do business in. For example, if you operate in Europe, you might want to create a catalog of tax rates for OSS VAT.
Creating tax rates through the API
The following example demonstrates how you can create a tax rate through the API.
display_nameappears on your customer’s invoice, and is usually a short name that describes the specific type of tax, such as
inclusiveproperty determines whether the tax
percentageis added to, or included in, the overall amount.
percentageis a number (up to 4 decimal places) that represents the tax percentage to be collected.
- The optional
countryproperty is a valid two-letter ISO country code. Some countries (for example, United States) require an additional two-letter
stateproperty. Use these properties to apply dynamic tax rates based on your customer’s billing or shipping address in Checkout Sessions.
- The optional
jurisdictionproperty represents the tax jurisdiction of the tax rate and can be used to differentiate between tax rates of the same percentage.
jurisdictionappears on your customer’s invoice. In the Dashboard, jurisdiction appears as the Region label for the tax rate.
- You can also store additional details in the
description. Your customers won’t see this property.
You can’t change the percentage, country, or state properties after you set them, and you can only set them when you create the tax rate.This ensures that existing subscriptions and invoices using tax rates aren’t affected… If you need to update these properties, create a new tax rate and archive the old object.
Inclusive versus exclusive tax
Tax rates can either be exclusive or inclusive. An exclusive tax is not included in the invoice subtotal, whereas an inclusive tax is.
The following table illustrates a 25% tax rate modifying the total amount due, depending on whether it’s exclusive or inclusive.
|25% Exclusive||$5.00||$1.25||$6.25 ($5.00 + $1.25)|
|25% Inclusive||$5.00||$1.00 (already included in the total)||$5.00 ($4.00 + $1.00)|
Tax exempt and reverse charge
You can set the exemption status for a Customer to either exempt or reverse.
In both cases, no tax is calculated on the invoice.
In the case where the customer is liable for the tax (that is, under the reverse-charge procedure within EU VAT), set the exemption status to
reverse. The invoice and receipt PDF includes the text “Reverse charge”.
If a one time payment is performed using Checkout, the exemption status is captured as customer_details in the Checkout Session object.
If the customer is either exempt or reverse, for invoices with inclusive tax rates, the buyer pays the
unit_amount price minus the tax that would’ve been paid had the user not been exempt or reverse. In other words, manual tax rates effectively calculate taxes as if the user weren’t exempt and then “backs out” the taxes.
The following table illustrates a 10% tax rate modifying the total amount due for an exempt or reverse customer. The first row is an example of “backed out” taxes.
|10% inclusive||100||$0||$90.91 (inclusive tax of $9.09 is subtracted from the price)|
Using multiple tax rates
You can apply Tax rates to line items or set them as a default for all line items in an invoice. You can set up to five tax rates per line item. When you set tax rates on both a line item and the invoice, the rates for that invoice don’t apply to that line item.
For example, this invoice has two overall tax rates of 9.975% and 5%:
|Invoice||Item tax rate||Overall invoice tax rate||Item tax rate (Effective)|
|Line item 1||(none)||9.975% and 5%||9.975% and 5%|
|Line item 2||10%||9.975% and 5%||10%|
|Line item 3||1% and 2%||9.975% and 5%||1% and 2%|
When you apply tax rates to an invoice, they’re aggregated into the total_tax_amounts attribute. This attribute represents the sum of all tax amounts, per tax rate, over the entire invoice.
For example, here’s an invoice where two line items have two different rates:
|Invoice||Amount||Tax Rate||Tax Amount||Totals|
|Line item 1||$5.00||5% (excl)||$0.25||—|
|Line item 2||$10.00||10% (excl)||$1.00||—|
|Total Tax Amount||—||—||$1.25||—|
When determining tax amounts, you can do either of the following:
- Round at the invoice line item level to the smallest currency unit before summing individual tax amounts across the entire invoice. We refer to this as “line item level”.
- Sum up all individual taxable amounts unrounded per tax rate. Combine them to a subtotal, apply the tax rate on the subtotal, and then round. We refer to this as “invoice level”.
Select this configuration on the invoice settings page in the Dashboard. The rounding configuration is only available for invoices with manual tax rates. Invoices with automatic Stripe tax always sum up the tax amounts first and then round.
Discounts are usually applied before tax, but this isn’t always the case.
Reading each line left-to-right, noting the formula applied (in the table header), you can trace the values as they’re applied to the final, total amount.
Exclusive tax discount example
Stripe always applies discounts before exclusive tax.
This example shows how we apply discounts to an exclusive tax rate.
|Invoice Item||Amount||Discount %||Discount $||Post Discount||Tax Rate||Tax $||Total|
|Line item 1||$5.00||10%||$0.50||$4.50||5% exl.||$0.23||$4.73|
|Line item 2||$10.00||10%||$1.00||$9.00||5% exl.||$0.45||$9.45|
|Total||$15.00||$1.50||$13.50||$0.68 (@ 5% exl.)||$14.18|
Inclusive tax discount example
When tax rates are inclusive, Stripe Tax applies discounts to the original amount first. Then, we recalculate taxes based on the remaining amount. This reduction has the side effect of reducing the tax amount due.
|Invoice Item||Amount||Discount %||Discount $||Post Discount||Tax Rate||Tax $ (Included)||Total|
|Line item 1||$5.00||10%||$0.50||$4.50||5% incl.||$0.21||$4.50|
|Line item 2||$10.00||10%||$1.00||$9.00||5% incl.||$0.43||$9.00|
|Total||$15.00||—||$1.50||$13.50||—||$0.64 (@ 5% incl.)||$13.50|
Both inclusive and exclusive tax with discount example
In the case where you have both inclusive and exclusive tax, the two rules apply together in the following steps for every line item:
- We calculate the inclusive tax amount based on the post-discounted amount by multiplying by the inclusive tax rate.
- We calculate the exclusive tax amount by multiplying the exclusive tax rate by the post-discounted amount, less the inclusive tax amount.
- We calculate the total amount due by summing the post-discounted amount and the exclusive tax amount (calculated in step 2).
|Invoice Item||Amount||Discount %||Discount $||Post Discount||Inclusive Tax Rate||Inclusive Tax $||Post Discount, Less Incl. Tax||Exclusive Tax Rate||Exclusive Tax $||Total|
|Line item 1||$5.00||10%||$0.50||$4.50||5% incl.||$0.21||$4.29||7% excl.||$0.30||$4.80|
|Line item 2||$10.00||10%||$1.00||$9.00||5% incl.||$0.43||$8.57||7% excl.||$0.60||$9.60|
|Total||$15.00||—||$1.50||$13.50||—||$0.64 (@ 5% incl.)||$12.86||—||$0.90 (@ 7% excl.)||$14.40|
Tax reporting and remittance
Any business collecting taxes ultimately needs to remit tax to the appropriate government.
See Tax reporting and filing to learn more.
From the Dashboard’s Tax Rates list page, you can export data files required for tax reporting calculations.
Stripe Billing provides two different levels of tax report export files:
- Invoice line item tax export — A lower-level export, this includes details down to the line item level, including per-line-item tax rates, inclusive/exclusive, amounts, and so on.
- Invoice totals export — Shows the aggregate tax collected on the invoice as a whole, including adjustments for any refunds.
For remittance reporting, use the line-item tax export to sum all amounts paid for all tax rates used. To factor in any refunds you will also need to pivot against the Invoice totals export.