Stripe and sales tax: What you need to know

Recent developments in payment platforms and tax regulations have brought increased attention to the IRS reporting requirements triggered by lower income thresholds. With these changes in mind, it's important to consider how using a payment platform impacts the collection of sales tax.

One such platform is Stripe, a payment processor that works and worldwide and allows merchants to receive payments via debit or credit cards, mobile wallets, ACH and buy-now pay-later services. It claims to offer a range of eCommerce services, including e-store integrations and invoicing.

Can it help with collecting, remitting and filing U.S. sales taxes? Mostly.

No filing but …

Stripe is a payment platform but not a marketplace facilitator. Stripe collects sales tax and does not directly file sales tax returns for you, though it does have for-fee “global partners” who can help with automated filing (not always the safest answer as sales taxes change). Stripe also does offer some services and a ton of information on sales tax obligations, seemingly to inform sellers as much as possible without actually filing for them.

“Sales tax is a type of indirect tax levied on the sale of certain goods and services in the U.S.,” reads the platform’s primer How to Collect Sales Tax. “It’s called an ‘indirect tax’ because it is imposed on the business but paid by the customer. The business collects the tax from the customer and is responsible for sending (remitting) the tax to the appropriate government agency at a set due date.”

Primers also cover a range of important sales tax topics:

• economic and physical nexus and how the former can vary state to state;
• registering for a sales tax permit;
• the Streamlined Sales and Use Tax Agreement;
• calculating sales tax, including exemptions, local taxes in NOMAD states, product codes and origin- versus destination-based sourcing;
• sales tax holidays and home rule states;
• sales from outside the U.S. and digital goods;
• and filing frequencies “and what to do when it’s time to file and remit.”

Stripe’s tools include a list of state registration details and links, a registration dashboard and the ability to allow Stripe to register for you with prefilled application details.

Full services

Stripe does seem to try to do a lot for sellers short of filing sales tax returns itself. For instance, as part of its tax calculation, Stripe collects addresses for both businesses and customers, verifies addresses (including post office boxes), and matches them to tax jurisdiction boundaries. Reports are also available for U.S. and international sales.

Stripe is also clear its warnings about non-compliance: “Filing on time is the best way to avoid the penalties and interest that come with a delinquent filing. Even if you have not collected sales tax during a reporting period, you may still need to file a return. These are called ‘zero returns’ and while you will not remit any tax to the state, you are still required to file a return.”

Indeed you are – filing being just one of the many details that go into sales tax compliance. Whenever your company looks for a new platform to facilitate sales, make sure to find out all the details of how that platform will help you with sales tax obligations.

If your business has Stripe sales tax questions as it expands, contact TaxConnex. We can act as your outsourced sales tax department. Get in touch to learn more.