Zero tax amounts and reverse charges

Stripe Tax returns a tax calculation result on every request. However, tax isn’t collected on a transaction in some situations, and the resulting tax amount is zero. For example, if you’re expanding tax_amounts on an invoice, you might see something like:

{
  "id": "in_1HF0KNFsnTpWVWVzFDgSizOj",
  "object": "invoice",
  ...
  "total_details": {
    "amount_tax": 0,
    "breakdown": {
      "taxes": [
        {
          "amount": 0,
          "taxability_reason": "not_collecting",
          "rate": {
            "id": "txr_1HHwa4Jm3J7Jh9FBnYJ9glJZ",
            "object": "tax_rate",
            "description": "VAT Germany",
            "display_name": "VAT",
            "country": "DE",
            "created": 1597863856,
            "inclusive": false,
            "jurisdiction": "DE",
            "livemode": false,
            "metadata": {},
            "percentage": 0.0,
            "state": null,
            "tax_type": "vat",
            "active": false,
          }
        }
      ]
    },
  },
  ...
}

The API returns the reason for a tax result in the taxability_reason field. A taxability reason clarifies either the applicable tax rate or why tax isn’t calculated.

The most common reasons for a zero tax result are the following:

Situations where Stripe calculates zero tax

Stripe Tax calculates zero tax in the following situations:

Not registered

Tax authorities require businesses to obtain a license or register before collecting tax in their jurisdiction. Each jurisdiction has its own rules regarding when you’re obligated to register and to start collecting and remitting tax. Obligations can arise from a physical presence in the jurisdiction or from reaching a threshold of sales into the jurisdiction.

Stripe automatically aggregates and analyzes your transactions and compares them to local thresholds. See Monitor your obligations to learn more about your potential tax registration obligations.

Learn more about how to register for sales tax, VAT, and GST in each location and, if you’re a Connect platform, how to use the Registrations API to manage tax registrations. You can also use Stripe to register on your behalf.

Exempt or zero-rated products

Products might be exempt or zero-rated in some jurisdictions. Both conditions result in no tax charged to the buyer, but the implications for the seller differ:

• Exempt products: These products aren’t subject to VAT, and sellers typically can’t reclaim input VAT on costs related to producing or supplying them.
• Zero-rated products: These products are technically taxable, but a 0% VAT rate is applied. The buyer pays no tax, but sellers can usually reclaim input VAT on related expenses.

If you don’t want to collect tax on a given product, tell Stripe Tax to treat it as non-taxable by assigning it tax code Nontaxable (txcd_00000000). Otherwise, Stripe Tax automatically determines when a product is exempt or zero-rated.

Reverse charge

In most transactions, the seller is responsible for collecting and remitting tax owed by the buyer. However, in a reverse charge transaction, the buyer must calculate and remit the tax. In this scenario, the seller’s invoice specifies that the transaction is subject to reverse charge and doesn’t include tax in the total amount. Reverse charge is common in the cross-border sale of B2B services.

Stripe Tax automatically applies the reverse charge based on the presence of a tax ID and the jurisdictions involved in the transaction. You can also set a customer’s tax status to reverse charge using the API or the Dashboard. Learn more about tax IDs and the Customer object.

For transactions with inclusive tax behavior, the reverse charge doesn’t affect the total amount paid by the customer. A tax-inclusive price remains unchanged, whether the tax amount is zero or positive. This means the unit price differs between transactions subject to reverse charge and those that aren’t. If no tax applies, the tax-inclusive price is the unit price. For sales where the tax amount is positive, the unit price is equal to the tax-inclusive price minus the tax amount. Learn more about tax behavior.

Exempt customers

Exempt customers are those who, under a jurisdiction’s rules, can make tax-exempt purchases. Each taxing jurisdiction determines the types of individuals or entities eligible for tax-exempt purchases. Common examples include non-profit organizations and government entities. If you have customers exempt from paying tax, set their tax status to exempt and provide the customer ID when creating a subscription, invoice, or Checkout Session. You can set a customer’s exempt status in the Dashboard, or use the API to set Customer.tax_exempt to exempt.

For transactions with inclusive tax behavior, the customer exemption doesn’t affect the total amount paid by the customer. A tax-inclusive price remains unchanged, whether the tax amount is zero or positive. This means the unit price differs between transactions involving exempt customers and those that don’t. If no tax applies, the tax-inclusive price is the unit price. For sales where the tax amount is positive, the unit price is equal to the tax-inclusive price minus the tax amount.

Stripe Tax doesn’t validate required documentation for supporting an exemption, such as customer exemption certificates. You’re responsible for determining and fulfilling any obligation to validate your customer’s exempt status and collect any required documentation, such as an exemption certificate. EXEMPTAX offers a Stripe App that you can use to collect and verify exemption certificates.

Excluded or unsupported territories

Some countries exclude administrative subdivisions or territories from the scope of their general tax system. In some territories, no tax is levied, while others might have their own tax regulations and rates.

Stripe Tax doesn’t calculate tax in the territories listed below, even if you’re registered in the country to which the territory belongs. Stripe Tax automatically determines if your customer is based in an excluded or unsupported territory using the postal code and jurisdiction name. For details on territories where Stripe Tax applies the parent country tax treatment instead of the territory-specific one, see the country-specific documentation.