Handling VAT/Sales Tax with Stripe?
Hi Hackers,
I'm working on my first SaaS product right now, and I thought it'd be a great idea to use Stripe to handle subscriptions. (And Stripe Connect for my customers to sell their digital products through my platform.)
I have an EU company, so I started looking into how to handle VAT in the EU and other taxes in the US (Sales Tax) and I found a few bad experiences with them.
After further reading, I found a few articles about possible solutions. And in a few forums, people just tell to use Paddle.
But I still see that thousands of makers decide to use Stripe and I'm curious if everyone has a solution for this or no one cares about handling this properly.
What about you?
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Great to see Stripe being discussed. One thing that rarely comes up alongside VAT/tax setup is the payment failure side of running subscriptions on Stripe.
Once you're set up with tax and billing, roughly 5–9% of subscription charges will fail each month — expired cards, bank declines, etc. Stripe's built-in dunning is pretty basic (generic emails, low open rates). The standard fix is a D+1/D+3/D+7 email sequence with card-update links — it can recover 20–40% of those failures.
I built something for this: tryrecoverkit.com/connect — connects to Stripe via OAuth and handles the sequence automatically. Free during beta. Figured it might be useful for others setting up Stripe subscriptions from scratch.
This thread hits home. I’ve been wrestling with the same VAT issues building my SaaS in the EU. Stripe makes the billing look easy until you hit the compliance wall, especially with VIES validation, reverse charge rules, and intra-EU B2B vs B2C handling.
I ended up building a little internal tool to automate VIES checks + country-specific tax treatments. It saved me so much time I figured it might help others too, happy to share what I’ve learned or walk through the process if anyone's interested.
Hey David!
I'm Kelly, a Product Manager at Stripe. I've responded to some similar posts in the past, so thought I'd jump in here as well.
You're right, tax/VAT can be hard to deal with. We've been working on a few things to make it easier for startups and developers to automatically calculate and collect tax natively within Stripe. I'd be more than happy to share what we're working on if you want to shoot me an email -- [email protected]
it would be good to share the result of this conversation back here, for those also interested in staying with Stripe.
I also wanted to choose Stripe but went with Paddle instead for the included tax handling. I am happy with them, my only concern is that when I switch my company to a VAT-paying one, I might lose money as Paddle will collect VAT instead of my company, so I won't be able to deduce my outgoing VAT.
Thank you Kelly! Just sent the mail. I'm eager to hear more about this.
Voted for MoR!
When it comes to taxes and billing, PayPro Global is for sure a lifesaver!
Located in NL and decided to go with Gumroad because of VAT situation in EU. Kinda hilarious that I’m dependent on a US company to solve the VAT mess the EU has created.
To clarify, quite happy with the EU, but they seriously dropped the ball on this.
Don't know what you mean by "bad experiences". I wanted to go with Paddle for a project in the EU but my client's products were physical and Paddle (at that time was for digital products only) so I went with Stripe especially for subscription and found it (for first-time payment integration) quite straight forward.
The question is how do you handle taxes with Stripe, as they don't do it for you (VAT, local taxes, US withholding taxes, etc.).
If someone made a Paddle for Physical Products I'd be signed up right away.
Currently we use stripe and do the vat manually with some helper scripts. Luckily books are zero-rated for vat in most countries.
If you only have modest revenue from non-physical sales then you can use the vat MOSS scheme for simplified accounting.
By bad experiences, I meant Stripe is not ready to properly handle VAT right now. It's left to the developers and (unfortunately) most of the devs don't really know about this.
I was checking possible solutions on this same issue in the past days for a ticketing system (selling from EU to any other country) which should cover the different VAT cases based on the customer country and entity (B2B, B2C).
From a developer point of view I was pretty impressed by Octobat Tax Engine https://www.octobat.com/products/vat-gst-sales-tax-engine which represents a great solution if you need to integrate it into something custom. Good luck!
I strongly recommend you consider Paddle too as they handle all taxes for and already for that it's worth the extra %. You get both cards and PayPal out of the box. I switched to it recently from Chargebee+Stripe+PayPal and I am very happy with the decision. I hate taxes.... they are complicated.
Second that. I'd love to use Stripe, but with a Startup located in the EU and Customer all over the world, Stripe is just not worth the hassle.