Stripe Tax requires your customer’s location to automatically calculate tax. This guide helps you decide what address information to collect from your customer and how to handle regional differences.
Supported address formats
Each billing and shipping address has the fields
country. The tables below describe the address formats supported when calculating tax.
Use one of the above address formats to ensure that we can consistently recognize your customer addresses. The country field must always be a valid ISO country code.
Which customer address is used
Stripe Tax uses a single address as your customer’s location when calculating tax. We choose the same address whether you’re selling a digital product, a service, or a shipped good.
The following process determines your customer’s location:
- We use your customer’s shipping address if it’s non-empty. Using an address that isn’t precise enough to calculate tax returns a status of
- We use your customer’s billing address if it’s non-empty. Using an address that isn’t precise enough to calculate tax returns a status of
- If the transaction has a payment method tied to it, we use the billing details of that payment method. Stripe Tax automatically determines the country of the payment method (e.g., using the country code of the credit card issuer).
- Otherwise, we geolocate the Customer IP address and use that location as your customer’s location.
The payment method tied to the transaction is the first one that’s set in this list:
- The Invoice default payment method
- The Subscription default payment method
- The Customer default payment method
Handling unrecognized locations
When we can’t determine your customer’s location precisely enough to calculate tax the Customer automatic_tax field is set to
unrecognized_location, and the Invoice
automatic_tax status field is set to
To fix this:
- Provide enough location details for your customer. For example, a country and state code alone aren’t enough to calculate tax in the US.
- Ensure that the postal code is valid.
- Prompt your customer to verify that the address is correct.
The complexity of taxes vary widely by region. Most countries have a single set of tax rules for the entire country. In the United States, sales tax rules and rates vary by state, with some states having hundreds of districts setting their own rates. In Canada, the type of tax and tax rate vary by province.
United States (US)
Stripe Tax supports calculating sales tax with only a basic 5-digit US postal code. The country field must be the ISO country code “US”. We use the point at the middle of the postal code area (or “centroid”) as your customer’s location. The tax rate at this point may differ from the tax rate at your customer’s full address. Whether a postal code alone is sufficient to identify the correct tax rates to impose varies by state.
We recommend against relying on a postal code alone in the following states: Arizona, Colorado, Oklahoma, Alabama, Missouri, Texas, Illinois, Washington, Kansas, New Mexico, Louisiana, Arkansas, California, Alaska, South Dakota, North Dakota, Utah, Nebraska, and West Virginia.
We recommend against using only an IP address to determine how much tax to collect. The location associated with an IP address could be some distance from the actual location where your customer is using it. Use the upcoming invoice endpoint to show them an estimate of the tax they’ll pay before collecting a billing or shipping address.
Europe and the European Union (EU)
In Europe, tax authorities in each country impose tax, not state or local authorities. The tax rate for the country doesn’t apply in a small number of areas, even though they’re physically located in a country that imposes tax. For example, the Italian postal code “00120” identifies Vatican City, where Italian VAT doesn’t apply.
Collect your customer’s postal code or state to enable Stripe Tax to determine when your customer is located in an excluded territory.
See the list of excluded territories supported by Stripe Tax.
In order for Stripe Tax to determine the applicable tax rate and collect tax in Canada, you need to collect the customer’s province or postal code.