DEPRECATED - TaxJar Calculations for Stripe

Table of Contents
  1. Introduction
Guidelines
    Stripe Deprecated

    This feature is not available by default and requires that your account be flagged for using this deprecated feature. New customers are not being accepted as this feature has been deprecated in favor of Stripe Tax.

    Connecting to Your Stripe Account

    Once you have a Stripe account and TaxJar account, log into your TaxJar account. Navigate to Account → Linked Accounts. You will see a button to initiate an integration between your TaxJar account and your Stripe account. Click the Stripe button.

    Link your Stripe Account
    Link your Stripe account to TaxJar

    After linking your Stripe account and receiving confirmation from our Support team, TaxJar will prompt you if you want to activate sales tax calculations on your invoices.

    After you link your Stripe account to TaxJar, you will be asked if you want TaxJar to automatically calculate taxes for invoices.

    Would you like
  TaxJar to calculate taxes for invoices?
    Calculate taxes for invoices

    Once you check this box and click “Save & Continue”, TaxJar will start listening to Stripe webhooks for certain events. Stripe will send data to TaxJar after invoices are are created and updated. TaxJar will react to these events and update the invoice with taxes immediately.

    If you want to deactivate TaxJar’s integration for sales tax calculation, then you may edit the connection and uncheck this box. Imports will continue to happen normally. If you wish to completely disconnect the TaxJar integration, then “unlink” the account; unlinking will stop tax calculations and imports for Stripe.

    Edit or unlink your Stripe account
    Edit or unlink your Stripe account from TaxJar

    Important: Please be sure to enable API calculations for your nexus states in your TaxJar account’s State Nexus Settings by checking the box under “Calculate Sales Tax in This State”. If you no longer have nexus in a state, you can disable your calculations for a specific state by clicking “Remove Nexus” in your State Nexus Settings.

    Check for each state with Nexus
    Enable nexus for each state where you have nexus

    Limitations

    TaxJar provides the best experience possible for Stripe users, but there are some areas that are limited due to the available Stripe APIs.

    Automatic tax calculations on first invoice of subscriptions

    Stripe automatically moves a subscription’s first invoice toward collection without waiting for any automated updates. Unfortunately this means we can not automatically add tax rates to this invoice.

    To collect sales tax on the first invoice of a subscription you’ll need to use our taxes API endpoint and then programmatically add the tax rates to your invoice. This has the benefit of showing your customers the full cost of the subscription upfront including all taxes owed.

    All future tax rates for the subscription can now be automatically managed by TaxJar.

    Inclusive Tax Rates

    TaxJar creates Tax Rates as tax exclusive, meaning that TaxJar will attach tax-exclusive rates to your invoice line items, which will increase the amount of money to be collected from the buyer to account for those taxes.

    Read more about exclusive Tax Rates at Stripe

    Standalone payments

    Imports support standalone payments; the limitation is only with sales tax calculations.

    For sales tax calculations, standalone payments are not attached to invoices, and therefore lack context required to accurately calculate taxes for that payment. Also, Stripe does not allow attaching tax rates to standalone payments.

    Custom Line Items on Credit Notes.

    Custom line items on credits notes have some limitations. Imports of credit notes and their line items are not affected; this limitation is only about sales tax calculations.

    When an invoice is paid, you may issue credits back to the customer for a variety of reasons. Usually, credits are interpreted as partial or full refunds on the original invoice.

    For example, if you sell 2 Breakable Pots and the customer receives 1 as broken during shipment, you may choose to refund the one Breakable Pot. This may be issued as a credit note in Stripe’s system where you specify that a quantity of 1 Breakable Pot as credited. Stripe will do the right thing automatically and also refund the tax collected for that 1 Breakable Pot. This is a supported scenario; you do not need to do anything to account for refunded taxes in this scenario.

    Another example, if you sell 2 Breakable Pots but the customer is not satisfied with the product, you might decide to refund $5 of the total sale (which does not correlate to any item prices). You can create a custom line item in the credit note, specify the amount as $5, and issue the credit. In this scenario, you must manually attach the appropriate taxes to the new custom line item. Remember, TaxJar attaches taxes to each line item and since you’re creating a new line item, now you must associate the appropriate taxes to that new line item.

    Let’s walk through this together.

    First we will create a new credit note. Notice that the taxes are applied to the line items.

    Taxes applied to line items
    Taxes are applied to the line items on the invoice

    In this scenario, we have 3 taxes applied: A state tax, a county tax, and a special district tax. Let’s remember these.

    Uncheck the existing line items since we’re not crediting those in their entirety. Now we will create a custom line item.

    New Custom Line Item
    New custom line item

    With the new custom line item, click “Set item tax” next to it, and attach the same tax rates attached to the other line items.

    Select the appropriate taxes
    Applying the same tax rates

    Verify that the tax rates are applied. You can see the total tax rate.

    Verify taxes are applied
    The total tax rate on the line item is consistent with the other taxable items

    Now you’re ready to issue a credit for the custom line item, which represents a partial refund. This will credit the appropriate amount of tax that was originally collected.

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