Following the acquisition of sales tax specialist TaxJar in April, Stripe is now taking another big step in the tax arena. The $ 95 billion payments giant is launching a new product called Stripe Tax, which will provide automatic, up-to-date sales tax calculations (covering sales tax, VAT, and GST) and related accounting services to Stripe Payments customers initially in around 30 countries and across the United States.
Stripe Tax is a separate service from TaxJar, but the two are not unrelated: While Stripe Tax has been under construction at Stripe’s Dublin offices for the past few months, Stripe’s sales manager for the EMEA, Matt Henderson, told me that the team had identified TaxJar as a strong company in the field, and this ultimately led to mergers and acquisitions between them.
Sales tax – and in particular a more transparent way to manage and track sales tax – is a painful problem for people doing business online. Digital and physical goods are taxed in over 130 countries, Stripe said, and within those there can be a huge amount of variation and complexity in compliance, as codes are also being updated. All the time. A poorly managed sales tax, on the other hand, can lead to pretty hefty fines, sometimes up to 30% interest on overdue amounts.
Unsurprisingly, a sales tax tool has been the most requested feature by Stripe customers, said Henderson, a demand that likely only increased last year as e-commerce and digital transactions rose. soaring with Covid-19.
Arguably, this makes Stripe Tax one of the company’s biggest product launches, let alone the first since it announced its monster fundraising round earlier this year.
Previously, Stripe customers would have used a third-party service (like TaxJar) to calculate sales tax, or more generally, these Stripe customers would have chosen to limit the number of places they sold goods and services, in order to minimize the pain of dealing with multiple, complex and generally quite localized tax codes.
Stripe said a survey of its customers found that two-thirds of respondents said the challenge of implementing sales tax was actually limiting their growth.
TaxJar has a strong system in place to handle this, but the Massachusetts-based company is primarily focused on the US market, which has enough sales tax to do with it (there are 11,000 different tax jurisdictions across the country).
That leaves a lot on the table for creating sales tax tools for the rest of the world: Stripe Tax’s wider geographic focus thus fills a particular geographic void for the business, no matter how well TaxJar is integrated. and Stripe over time.
There are other differences to note between the two.
TaxJar grabbed the attention of Stripe with an established business – 15,000 customers at the time of the announcement. Stripe has (wisely) integrated this as a standalone business, so new and existing customers who use TaxJar can continue to use it as is. That is, at least for now, they don’t need to be Stripe Payments customers to use TaxJar, although the integration between the two platforms will only get better with the time.
Stripe Tax, on the other hand, is designed from the ground up as a product aimed specifically at increasing touchpoints and loyalty with Stripe customers in particular.
Stripe Tax provides real-time tax calculation based on customer location and product sold; a description that is transparent to customers; management of tax identification in areas (such as Europe) where professional customers can provide their code and obtain a reverse charge of the tax if they themselves are below a certain turnover threshold; and the reconciliation and reporting of all transactions to facilitate deposit and disbursement.
But, there is currently no way to use Stripe Tax outside of Stripe itself.
This could pose problems for some customers – many of the more powerful retailers these days will take an ‘omnichannel’ approach that could cover selling through marketplaces, selling through websites, selling through social media and more. again – and all of those storefronts might not be powered. by Stripe. It will be worth seeing if future iterations of Stripe Tax can accommodate this.
“Nobody jumps out of bed in the morning excited to face taxes,” John Collison, co-founder and chairman of Stripe said in a statement. “For most businesses, managing tax compliance is a painful distraction. We simplify everything about calculating and collecting sales taxes, VAT and GST, so our users can focus on growing their business.
The launch of Stripe’s most important product before Stripe Tax – Stripe Treasury – underscores how much the company is currently very focused on diversifying outside of its core payment business and opening up the platform to new ones. much larger and larger-scale transactions. Treasury, which is still in invite-only mode, has seen Stripe partner with established banks to provide business banking service, giving its customers a way to manage the money they generate from their businesses. powered by Stripe.
The full list of countries where Stripe Tax is launched are 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, United States and United Kingdom.