After acquiring VAT specialist TaxJar in April, Stripe is taking another big step in taxation today. The $ 95 billion payment giant is launching a new product called Stripe Tax, which will provide automatic, updated sales tax calculations (including sales tax, sales tax, and GST) and related accounting services for Stripe payment customers initially in approximately 30 countries and the United States
Stripe Tax is a separate service from TaxJar, but the two are not unrelated: When Stripe Tax was built out of Stripe’s Dublin offices over the past few months, Matt Henderson, Stripe’s managing director for EMEA, told me the TaxJar team was a strong one Companies in this field, which ultimately led to M&A between them.
Sales tax – and especially a more seamless way to deal with sales tax collection and tracking – is a painful topic for people who do business online. Digital and physical goods are taxed in over 130 countries, Stripe said, and there can be a large amount of variance and compliance complexity in the process as the codes are also constantly updated. Mishandled sales tax, meanwhile, can result in fairly hefty fines, sometimes up to 30% interest on overdue amounts.
Unsurprisingly, a sales tax tool was the most requested feature by Stripe’s customers, Henderson said, a request that probably only got louder last year when Covid-19 e-commerce and digital transactions went through the roof.
This makes Stripe Tax arguably one of the company’s most significant product launches, not to mention the first since its monster financing round was announced earlier this year.
Previously, Stripe customers would have used a third-party service (like TaxJar) to calculate sales tax, or typically, these Stripe customers would have chosen to limit the number of places they sold goods and services to avoid the pain when dealing with multiple, complex and usually fairly localized control codes.
Stripe said a survey of its customers found that two-thirds of respondents said the challenge of introducing sales tax actually limited their growth.
TaxJar has developed a strong system to deal with this, but the company – based in Massachusetts – primarily focuses on the U.S. market, where sales tax is complicated enough (there are 11,000 different tax jurisdictions in the country).
This leaves a lot on the table for building sales tax tools for the rest of the world: Stripe Tax’s broader geographic focus fills a particular geographic void for the company, regardless of how well TaxJar and Stripe integrate over time.
There are a few other notable differences between the two.
TaxJar became aware of Stripe with an established company – 15,000 customers at the time of the announcement. Stripe has grown this (carefully) as a standalone company so new and existing customers who use TaxJar can continue to use it as it is. That said, you don’t have to be Stripe payment customers, at least for now, to use TaxJar, even if the integration between the two platforms will only improve over time.
Stripe Tax, on the other hand, is designed from the ground up as a product that specifically aims to specifically increase touchpoints and loyalty with Stripe customers.
Stripe Tax provides real-time tax calculation based on the customer’s location and the product sold; transparent list for customers; Tax identification management in areas (such as Europe) where business customers can enter their code and receive a tax reversal if they themselves fall below a certain turnover threshold; and reconciliation and reporting across all transactions to simplify filing and transfer.
However, there is currently no way to use Stripe Tax outside of Stripe itself.
This could pose problems for some customers – today, many of the strongest retailers will be taking an “omnichannel” approach that could cover selling through marketplaces, selling through websites, selling through social media, and more – and not all of these might become storefronts operated by Stripe. It will be worthwhile to see if future iterations of the Stripe Tax can accommodate this.
“Nobody jumps out of bed excitedly looking at taxes in the morning,” Stripe co-founder and president John Collison said in a statement. “For most businesses, tax compliance is a painful distraction. We simplify everything related to the calculation and collection of sales tax, sales tax and GST so that our users can concentrate on building their business. “
Stripe’s main product launch before Stripe Tax – Stripe Treasury – underscores how much the company is currently focusing heavily on diversification outside of the basic payments business, opening the platform to much broader, larger transactions. In Treasury, which is still in invite-only mode, Stripe has partnered with established banks to offer a business banking service that offers its customers a way to deal with money they run from their Stripe Generate business.
The full list of countries where Stripe Tax will be introduced is Australia, Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg , Malta, New Zealand, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, USA and United Kingdom.