VAT, GST, and other taxes are unavoidable. The question is not if you need to pay them but how you will do it. Taxes apply to almost everything that businesses sell, from physical products to services provided. How companies account for and pay taxes can be confusing. Fortunately, there are ways to simplify this process with Stripe as your accounting partner as well as tax tips you may follow to prepare your business for tax season. In this article, we will explore the basics of how Stripe can help you manage and track taxes for your business. Keep reading to learn how to apply taxes on Stripe!!
What is Stripe?
Stripe is the world’s most flexible payment processor. It’s an easy-to-use and powerful tool that you can use to accept payments online with ease. Since its launch in 2010, the company has processed $100 billion in payments. This is a testament to just how robust and efficient its engineering and operations are. It has over 1 million businesses and organizations as customers.
You can use Stripe to add payment processing to your website or mobile app. Whether you are a brick-and-mortar business or an online retailer, Stripe can serve as your payment gateway. It supports payment methods in more than 100 countries.
Stripe is available in US dollars, euros, pounds sterling, Australian dollars, Canadian dollars, Swiss francs, Japanese yen, and Brazilian reais.
VAT (Value-Added Tax)
VAT is a consumption tax applied to most goods and services. The tax is based on the final price of the goods or services being sold.
A good example of VAT is the sales tax on a meal at a restaurant. The tax on that meal is not based on how much the restaurant paid for food or ingredients. Instead, it’s based on the final price of the meal (including the cost of ingredients, labor to prepare and serve it, and rent of the restaurant).
GST (Goods and Services Tax)
The GST is similar to VAT and is charged on goods and services that are sold in most countries around the world. GST is a consumption tax charged at the rate of 0% to 15% (depending on the country). While VAT is charged based on the final price of the goods or services, GST is charged on the value of the goods themselves. For example, if you buy a laptop that costs $1,000 and 10% GST is applied on it, the GST applied is $100.
Stripe and taxes: An overview
To begin, it’s important to understand that Stripe isn’t your accountant. It’s a payment processor that facilitates payments and transfers money. The company has no role in accounting and tax compliance. As a business owner, you’re responsible for calculating and remitting taxes correctly. You also need to report, file, and track taxes properly.
With the help of Stripe, you can streamline and simplify the accounting and tax process. You can use Stripe to collect taxes for specific items sold, such as goods and services. You can also set up tax codes for how to calculate taxes in specific situations. For example, you can use a tax code to specify how to handle sales tax in a state that you don’t have a physical presence in.
How to track VAT with Stripe
Stripe has several ways to help you track VAT.
First, you can use the VAT-exempt products functionality to identify items you don’t need to charge VAT on.
Next, if you need to track VAT for a particular product or service, you can use the VAT function. This function lets you specify the amount of VAT you charge on a product or service. You can use this function with customers that are located in the same EU country that you are in and need to track VAT on their purchases.
With customers located outside the EU, you can use the non-VAT taxable sales functionality. This functionality lets you specify whether a sale is subject to VAT or GST.
When you use the non-VAT taxable sales functionality, you can track the taxes you charge on each sale. This functionality is especially useful if you sell to customers located in other countries and need to comply with local tax laws.
Tracking VAT can be simplified with the implementation of specialized accounting software such as Synder. Synder can sync your Stripe transactions and record VAT into your accounting system (QuickBooks Online, QuickBooks Desktop, Xero).
How to manage GST with Stripe
If you sell goods and are located in a GST-registered country, you can use Stripe to track and manage GST. You can use the GST function to specify the amount of GST charged. The GST function is available for Australian businesses and for businesses located in other countries that charge GST.
To use the GST function, you need to provide your goods and services with a GST-inclusive price. In other words, you need to add GST to the final price of your goods. For example, if you sell an item for $100, you need to add GST to that price. You can do that by adding 10% GST to that price. In this case, the final price of the item is $110.
The world of accounting and taxes can be complicated and time-consuming. Luckily, Stripe can help you simplify and automate many aspects of accounting. With Stripe, you can track VAT or GST on specific products and services sold. You can also track the taxes you charge on each sale. That way, you can stay on top of your compliance and efficiency as a business. With the help of Stripe, you can simplify and automate many aspects of accounting including tracking VAT and GST charged on products and services.
Want to find out more about the way Stripe works? Check out our article ‘What is Stripe Application Fee?‘