After acquiring sales tax specialist TaxJar in April, today Stripe is taking another big step in the tax realm. The $95 billion paying company is launching a new product called Stripe Tax, which will initially allow Stripe Payments customers in nearly 30 countries and across the U.S. to perform automated, updated sales tax calculations (covering sales tax, VAT and GST). and provide related accounting services.
Stripe Tax is a separate service from Taxjar, but the two are not unrelated: As Stripe Tax was being built out of Stripe’s offices in Dublin over the past several months, Stripe’s business lead for EMEA Matt Henderson told me that the team worked with Taxjar. A strong company in the identity field, and eventually led to M&A between them.
Sales tax – and especially a more intuitive way of dealing with charging and tracking sales tax – is a painful issue for people doing business online. Digital and physical goods are taxed in more than 130 countries, Stripe said, and there can be a huge amount of variation and compliance complexity within, as codes are updated all the time. Meanwhile, a sales tax done incorrectly can result in very hefty fines, sometimes up to 30% interest on past due amounts.
Unsurprisingly, a sales tax tool has been the most requested feature from Stripe customers, Henderson said, a request that probably only got louder in the last year, as e-commerce and digital transactions have come through the roof with Covid-19. Gone from
Arguably, this makes Stripe Tax one of the company’s more significant product launches, not to mention the first since announcing its monster funding round earlier this year.
Previously, Stripe customers may have used a third-party service (such as TaxJar) to collect sales tax, or more commonly, Stripe customers may have opted to limit the number of locations they sold goods and services. , so that the minimum can be done. The pain of dealing with multiple, complicated, and usually quite local tax codes.
Stripe said a survey of its customers found that two-thirds of respondents said the challenge of implementing a sales tax had actually limited their growth.
TaxJar has built a robust system to handle this, but the company — based out of Massachusetts — focuses primarily on the US market, which has a fairly complex sales tax (there are 11,000 different tax jurisdictions in the country).
This leaves a lot on the table to create a sales tax tool for the rest of the world: Stripe Tax’s broad geographic focus thus fills a particular geographic gap for the company, regardless of how well TaxJar and Stripe have grown over time. be kind of integrated.
There are some other differences to note between the two.
TaxJar came to Stripe’s attention with an established business — 15,000 customers at the time of announcement. Stripe (wisely) said that as a standalone business, so new and existing customers who use TaxJar can continue to use it. That is, at least for now, they don’t need to be a Stripe payments customer to use TaxJar, even though the integration between the two platforms will only get better over time.
The Stripe Tax, on the other hand, is being built from the ground up as a product specifically aimed at increasing touchpoints and stickiness with Stripe customers.
Stripe Tax provides real-time tax calculations based on the location of the customer and the product sold; Creating transparent items for customers; Tax ID management in regions (such as Europe) where business customers can provide their code and receive a reverse charge on tax if they themselves are within a certain turnover limit; and reconciliation and reporting in all transactions to facilitate filing and remittance.
But, for now there’s no way to use Stripe Tax outside of Stripe.
This can cause some problems for some customers – many of the most robust retailers these days will take an ‘omnichannel’ approach, which can include selling through marketplaces, selling through websites, selling through social media, etc. — and not all of those storefronts can be operated. by strip. It will be worth seeing if future iterations of the Stripe tax can be attributed to this.
“No one gets out of bed in the morning excited to tackle taxes,” Stripe co-founder and president John Collison said in a statement. “For most businesses, managing tax compliance is a painful distraction. We simplify everything about the calculation and collection of sales tax, VAT and GST, so that our users can focus on building their business.
Stripe’s most significant product launch before the Stripe tax — Stripe Treasury — underscores how the company is currently diversifying outside of its core payments business and opening up the platform to more broader, more scaled transactions. Treasury, which is still in invitation-only mode, saw Stripe partner with established banks to provide a commercial banking service that gives its customers a way to handle the money generated from their Stripe-operated businesses.
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