Understanding zero tax amounts

Learn more about how tax is calculated.

Stripe Tax returns a tax calculation result on every request. However, there are some circumstances where tax isn’t collected on a transaction, and the resulting tax amount is zero. For example, if you’re expanding tax_amounts on an invoice, you may see something like:

{
  "id": "in_1HF0KNFsnTpWVWVzFDgSizOj",
  "object": "invoice",
  ...
  "total_details": {
    "amount_tax": 0,
    "breakdown": {
      "taxes": [
        {
          "amount": 0,
          "rate": {
            "id": "txr_1HHwa4Jm3J7Jh9FBnYJ9glJZ",
            "object": "tax_rate",
            "description": "VAT Germany",
            "display_name": "VAT",
            "country": "DE",
            "created": 1597863856,
            "inclusive": false,
            "jurisdiction": "DE",
            "livemode": false,
            "metadata": {},
            "percentage": 0.0,
            "state": null,
            "tax_type": "vat",
            "active": false,
          }
        }
      ]
    },
  },
  ...
}

The most common reasons for this are the following:

Reason	Explanation
Not registered	You must register before collecting tax in a jurisdiction. You can specify where you’re registered to collect tax on the Tax settings page.
Exempt or zero-rated products	Certain products are exempt from tax or zero- rated. In both cases the buyer doesn’t pay tax.
Reverse charge	Transactions between two businesses may be subject to reverse charge. In these cases, the buyer is responsible for accounting for the VAT due under the reverse charge.
Exempt customers	Some customers are exempt from paying indirect tax in certain jurisdictions. You can specify when a customer is exempt on the Customer object.
Excluded territory	Some countries have administrative subdivisions or territories, with the geographic region being outside the scope of the associated country’s VAT system. A list of these excluded territories is below.

The tax outcome for each payment is available when viewing a payment in the Dashboard under Taxability.

Not registered

Taxing authorities require businesses to obtain a license or otherwise register before starting to collect tax in their jurisdiction. Each jurisdiction has their own rules regarding when you’re obligated to register and begin collecting and remitting tax. Obligations can arise from, but are not limited to, a physical presence in the jurisdiction or from reaching a threshold of sales into a jurisdiction. For example, as of February 2021, for businesses based outside of California (e.g., no physical presence), you only need to register when you surpass 500,000 USD in sales.

Stripe automatically aggregates and analyzes your transactions and compares them to local thresholds. You can see these and add your registrations in your Tax settings.

Exempt or zero rated product

Products may be exempt or nontaxable in some jurisdictions. For example, as of February 2021, the state of California considers software as a service to be a nontaxable service. The buyer pays no tax and the seller usually can’t reclaim any credits from costs associated with producing the product.

Products can also be zero-rated, meaning while they’re technically taxable, the applied rate is 0%. For example, as of February 2021, children’s clothing is zero-rated in Ireland. The buyer pays no tax, however the seller may be able to reclaim credits from costs associated with producing the product.

The tax treatment of products not only varies by jurisdiction but is subject to change. Stripe Tax automatically determines when a product is exempt or zero rated.

Reverse charge

While in most cases it’s the seller’s responsibility to determine and calculate the tax owed by the buyer, the buyer may be required to account for the VAT under a reverse charge. With a reverse charge,sellers provide invoices detailing the purchase such that the buyer can account for the tax. A reverse charge is common in cross-border B2B supply of services. For example, for businesses with an origin address in the European Union, the following logic applies:

Buyers from	B2C	B2B
Same EU country	Charge VAT	Charge VAT
Different EU country	Charge VAT	No VAT (reverse charge)

Stripe Tax automatically applies the right logic depending on the presence of a tax ID and the jurisdictions involved in the transaction.

For transactions with inclusive tax behavior where reverse charge applies, the buyer pays the full unit_amount Price, but isn’t charged tax. In these cases, a “Reverse Charge” indicator appears in the Stripe Dashboard, and the Invoice reads “Tax to be paid on reverse charge basis” instead of zero.

Download example reverse charge invoice PDF

If you haven’t collected a tax ID on Stripe, but you want to mark a transaction as reverse charge, specify the customer.exempt parameter as reverse. If Checkout creates a one time payment, the exemption status is instead captured as customer_details in the Checkout Session object. You’re responsible for making sure that customer information is accurate (including a tax identification number).

Stripe displays the provided customer tax ID on an invoice, regardless of whether or not it’s valid. Stripe Tax provides automatic validation by checking the tax ID format against the expected format and validating the tax ID against external tax authority systems for certain countries.

Learn more about Tax IDs

Exempt customers

Exempt customers are those who under a jurisdiction’s rules are able to make tax-exempt purchases. Each taxing jurisdiction determines the type of individuals or entities who can make tax-exempt purchases. Common examples are nonprofit organizations and government entities. If you have customers that are exempt from paying tax, you can specify this by setting the exempt status of a customer and providing the customer ID when creating a subscription, invoice, or Checkout Session. You can manage customer exempt status using the Dashboard or using the API by setting the customer.exempt field.

For transactions with inclusive tax behavior where the customer is exempt, the buyer pays the full unit_amount Price, but there’s no tax charged. In these cases, an “Exempt” indicator appears in the Stripe Dashboard and the Invoice reads “Tax is exempted” instead of zero.

Download example exempt invoice PDF

Stripe Tax automatically calculates an exemption on the transaction when you set the customer.exempt field, but it doesn’t perform any validation of required documentation for supporting an exemption such as customer exemption certificates. You’re responsible for determining and fulfilling any obligation to validate your customer’s exempt status and collect any required documentation such as an exemption certificate.

Excluded territories

Some jurisdictions contain administrative subdivisions or territories, with the geographic region being outside the scope or “excluded” from the associated country’s VAT system.Although these territories don’t fall under the scope of the tax systems of the associated country, they may have their own tax system and be subject to different tax regulations and rates. If your customer is based in an excluded territory, the resulting tax amount may be zero. Below is the list of supported excluded territories where no tax is calculated, even if you’re registered in the country where the excluded territory is located. Stripe Tax automatically determines if your customer is based in an excluded territory.

Country	Excluded Territories
Finland	Åland Islands
France	Wallis and Futuna Saint Pierre and Miquelon Saint Martin Saint Barthélemy
Italy	Vatican City
Norway	Svalbard Jan Mayen
Spain	Ceuta Melilla Canary Islands
United Kingdom	Channel Islands (Guernsey and Jersey) British Virgin Islands Falkland Islands