The Stripe logo on a smartphone with US dollar banknotes in the background.
Budrul Chukrut | SOPA pictures | LightRocket via Getty Images
LONDON – Stripe on Thursday launched a new product designed to make it easier for businesses to calculate and collect sales taxes, marking the digital payment giant’s latest foray into other financial areas.
The service called Stripe Tax automates the calculation and collection of sales tax, sales tax, and goods and services tax for transactions made through the Stripe platform. The British newspaper publisher News UK and the Dutch start-up Routetitan are already using the service.
Matt Henderson, Stripe’s EMEA head, said calculating how much sales tax to pay on specific transactions can be a complex process, with rules varying across countries. The US has over 11,000 different sales tax jurisdictions, “often the size of a small town,” Henderson told CNBC.
“There are many different variables that determine what the correct tariff is and when it is due to be collected and paid,” he added. “In Germany, for example, a house rabbit costs 19% VAT and a house guinea pig 7% VAT, while in Great Britain or Ireland you would make no difference in such things.”
Companies can enable Stripe Tax by adding a single line of code to their website, according to the company. Stripe uses data such as a customer’s location and the product or service sold to calculate the tax due. Stripe makes money by doing a small portion of the transaction for its traders.
Stripe, which competes with Square, Adyen, and Checkout.com, received a big boost from the coronavirus pandemic last year as many companies went online due to lockdown restrictions around the world.
Stripe has won more than 500,000 new customers in Europe alone since the pandemic began, according to Henderson. The company is increasingly expanding into areas beyond payments like lending and bank accounts from partners like Citigroup and Goldman Sachs.
Stripe, however, ruled out any intention of becoming a full-fledged bank, and President John Collison said last year he doesn’t believe in the Silicon Valley “do it all” mentality.
Stripe was last privately valued at $ 95 billion in a funding round in March. The company said it will use the fresh funds to expand its European operations. Stripe’s sales tax software was developed out of Dublin, which employs around 80 engineers.
“We really need to be in investment mode, partly because there are pending deals in payments, but also because there are just so many other things besides payments that are hindering businesses from growing online,” said Henderson.
The new product will be launched after the takeover of the US start-up TaxJar, which specializes in sales tax software, in April.
According to the Bank of America, the total addressable sales tax market is estimated at $ 24 billion. A number of companies compete in this area, including sales tax specialist Avalara and accounting software provider Intuit.
Stripe is a seven-time CNBC Disruptor 50 company that ranks number 2 on this year’s list.
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