How-to add Taxes Overview

Efficiently managing taxes for your business is crucial for staying compliant and organized. The Tax Settings feature in your CRM streamlines this process, allowing you to add, manage, and apply taxes easily. This powerful tool saves time, reduces errors, and enhances financial operations. The SaaS workaround using Stripe tax management offers a temporary solution for streamlined tax handling, ensuring compliance with regional tax regulations while improving customer experiences during transactions. This method currently supports SaaS direct payment links.

How does the CRM incorporate Taxes into its workings?

Efficiently managing taxes for your business is crucial for staying compliant and organized, ensuring smooth financial operations, and maintaining a positive reputation. The Tax Settings feature within your CRM effectively simplifies tax management, making it easier for businesses to add, manage, and apply taxes as needed. This powerful tool saves businesses time, reduces errors, and enhances financial operations. 

The Tax Settings feature enables businesses to quickly set up and configure multiple tax rates, providing flexibility in applying taxes for various products or services. This streamlines invoicing, ensuring clients are billed accurately while adhering to regional tax regulations. Additionally, the feature helps businesses minimize the risk of costly mistakes resulting from manual tax calculations or misinterpretation of tax laws.

Businesses can focus on their core operations by simplifying the tax management process, improving overall efficiency and productivity. Furthermore, the Tax Settings feature allows for better financial reporting and analysis, enabling businesses to make informed decisions and clearly understand their financial health. 

What are some usage cases and benefits of this capability?

Usage Case 1: Digital Marketing Agency

A digital marketing agency offers services like SEO, social media management, and content marketing solutions. Each service may have its own pricing and tax requirements based on the customers' locations.

Benefits:

Simplified Invoicing: The Tax Settings feature in the CRM allows the agency to apply the correct taxes to each service, making invoicing more accurate and efficient.

Enhanced Compliance: Proper tax management ensures the agency stays compliant with tax laws in their clients' regions, avoiding potential legal issues.

Usage Case 2: E-commerce Store

An e-commerce store sells products with varying tax rates depending on the items and shipping destinations. They must apply different taxes to different products and manage tax exemptions for specific customers.

Benefits:

Accurate Tax Calculation: The Tax Settings feature helps the store apply the correct taxes to each product, minimizing errors and maintaining consistency across transactions.

Improved Customer Satisfaction: By accurately calculating taxes, the store can offer a seamless and transparent checkout experience, increasing customer satisfaction.

Usage Case 3: Event Management Company

An event management company organizes conferences, workshops, and webinars across multiple countries, each with its tax regulations. They must apply different taxes for tickets, sponsorships, and additional services like catering or equipment rentals.

Benefits:

Streamlined Tax Management: Using the Tax Settings feature, the company can easily manage and apply taxes for various event offerings, making their operations more efficient.

Increased Profitability: Accurate tax management helps the company avoid overcharging or undercharging clients, ensuring they receive the correct revenue from each event.

Usage Case 4: Consulting Firm

A consulting firm provides services like business strategy, financial planning, and IT consulting, each with different tax rates depending on the client's location and the nature of the service provided.

Benefits:

Time-Saving: The Tax Settings feature eliminates manual tax calculation, saving the firm time and effort.

Enhanced Financial Reporting: With streamlined tax calculations, the consulting firm can generate more accurate financial reports, enabling better decision-making for the business.

How to use the Tax Settings feature in Payments?

Step 1: Creating and Adding Taxes

Navigate to Payments > Tax Settings> Click "Add Tax."

Fill out the popup information: tax name, percentage rate, optional description, and tax ID number.

Click "Add Tax." Your tax will now appear in the list of Taxes.

Step 2: Managing and Using Your Taxes

Use the "Actions" dropdown on the right to delete a tax.

Head to Payments> Invoices

When creating an invoice or editing a draft Invoice, click "Add Tax" under a product.

In the "Add Taxes" popup, check the box for the tax(es) you wish to add.

Click Save to confirm your changes. The tax(es) will be calculated in the invoice.

Please Note: 

The Tax Settings feature is currently available only for invoices and not integrated into funnel checkouts yet.

Implementing Stripe Tax Management as a Workaround for SaaS Agencies

In addition to the Tax Settings feature, SaaS agencies operating in regions like the EU, UK, and North America can benefit from implementing the Stripe tax management workaround. While a primary tax management solution is being developed, integrating Stripe Checkout and its Tax management service can temporarily simplify tax management and ensure compliance with regional tax regulations. This workaround offers flexibility, accuracy, and improved customer experiences during transactions.

The Stripe tax management workaround involves configuring tax categories like VAT or Sales Tax in Stripe for your SaaS products, offering flexible pricing options that include or exclude taxes. Using Stripe's Tax management service, SaaS agencies can provide a seamless checkout experience, displaying taxes transparently to prospects during transactions. Moreover, this approach simplifies tax compliance by ensuring adherence to tax laws in target regions.

Please Note

The Stripe tax management workaround is currently available only for SaaS direct payment links and is not supported on funnel sales yet. As this method serves as a temporary solution, a more comprehensive tax management solution is expected to be developed to support all aspects of your SaaS business.

What are some usage cases and benefits of this capability?

Usage Case 1: Subscription-based Software

A SaaS company offers subscription-based software with multiple plans. They need to charge different tax rates depending on customers' locations and the type of plan chosen.

Benefits:

Real-time Tax Calculation: The Stripe tax management workaround allows for dynamic tax calculation during checkout, ensuring accurate tax rates based on the customer's location.

Simplified Tax Compliance: Using Stripe's tax management service, the SaaS company can ensure compliance with regional tax regulations, minimizing the risk of legal issues.

Usage Case 2: SaaS Platform with Add-ons

A SaaS platform provides a core service and offers various add-ons that users can purchase. The tax rates for the core service and add-ons may vary depending on the region.

Benefits:

Flexible Tax Application: The Stripe tax management workaround allows the SaaS company to apply different tax rates for the core service and add-ons, ensuring accurate billing.

Enhanced Customer Experience: Transparent tax calculation during checkout improves customer experience, fostering trust and satisfaction.

Usage Case 3: SaaS Company Expanding Internationally

A SaaS company is expanding its services to new international markets, each with unique tax regulations and requirements.

Benefits:

Scalable Tax Management: The Stripe tax management workaround supports the SaaS company's growth by simplifying tax management across multiple markets, ensuring compliance with regional tax laws.

Reduced Administrative Burden: Leveraging Stripe's tax management service reduces the time and effort required to manage taxes, allowing the company to focus on other aspects of its international expansion.

Usage Case 4: SaaS Company Offering Custom Plans

A SaaS company offers custom plans tailored to the unique needs of its clients. These custom plans may have varying tax rates based on the services included and the client's location.

Benefits:

Accurate Tax Calculation: The Stripe tax management workaround allows the SaaS company to calculate and apply taxes accurately for custom plans, ensuring clients are billed correctly.

Improved Financial Reporting: With streamlined tax calculations, the SaaS company can generate accurate financial reports, enabling better decision-making for the business.

Please Note:

Please check with your tax attorney or CA regarding tax laws in your region. This article is an assumption for demo purposes only.

How to use Taxes in SAAS Payment Links?

To use the SaaS workaround with Stripe tax management for your subscription-based software or services, follow these steps:

Set up tax rates in Stripe:

a. Log in to your Stripe account.

b. Navigate to "Products" > "Tax Rates." > Click on "New." 

c. Fill in the required information, such as the tax name, percentage rate, and whether it's inclusive or exclusive (inclusive means your agency will cover the tax; exclusive implies the customer will pay tax on top of the plan price). 

d. Click "Add Tax Rate" to create the tax rate. 

Please Note:

To learn more about Tax behaviours in Stripe please click here. Please make sure to enable Stripe Tax Management on your account before you proceed.

Apply tax rates to existing customers:

a. In Stripe, go to "Customers."

b. Select the customer whose subscription you want to edit.

c. Click "Edit subscription."

d. Under "Add Tax," select the tax rate you created in Step 1.

e. Save the changes to apply the tax rate to the customer's subscription.

Apply tax rates for new customers:

Once you have activated Stripe's Tax management service on your account and gone through the registration process, you will be able to pick tax categories on your SaaS products like this:

a. Follow these instructions to add your created tax rate to your SAAS products payment link

You may also need to define tax behavior on individual prices to decide whether to include (no additional charge to your client) or exclude (taxes charged extra to your client).

b. Now you can copy the SaaS direct sale link and share it with your prospects

And their experience will look like this.

FAQs

How do I handle tax exemptions for specific customers using the CRM Tax Settings feature or the SaaS workaround?

Answer: For the CRM Tax Settings feature, create a tax with a 0% rate and apply it to the exempt customer's invoice. For the SaaS workaround, create a custom tax rate with a 0% rate in Stripe and apply it to the exempt customer's subscription.

Can I use multiple tax rates with the CRM Tax Settings feature and the SaaS workaround?

Answer: Both methods allow you to create and apply multiple tax rates for different products, services, or customer locations. You can add various taxes to an invoice in the CRM Tax Settings feature. In the SaaS workaround, you can select the appropriate tax rate when editing a customer's subscription in Stripe or configure your third-party Stripe integration to apply the correct tax rate during checkout.

What happens if a customer changes their location or billing address?

Answer: You must update the customer's tax rate based on their new address for both methods. In the CRM Tax Settings feature, update the taxes on their invoice. For the SaaS workaround, update their subscription in Stripe and configure your third-party Stripe integration to automatically update tax rates during checkout.

Can I apply taxes to one-time purchases using both methods?

Answer: By adding taxes to an invoice, you can apply taxes to one-time purchases using the CRM Tax Settings feature. With the SaaS workaround, create tax rates in Stripe and use a third-party integration that supports dynamic tax calculation during checkout.

How do both methods handle refunds?

Answer: For the CRM Tax Settings feature, adjust the tax amounts manually on the refunded invoice. With the SaaS workaround, Stripe will automatically calculate and refund the correct amount of taxes based on the original transaction.

Can I generate tax reports using both methods?

Answer: The CRM Tax Settings feature does not directly provide tax reports, but you can export invoice data, including tax information, and use third-party tools or accounting software to generate tax reports. For the SaaS workaround, export transaction data from Stripe and use similar tools or software to create tax reports.

How do I handle tax changes or updates using both methods?

Answer: For the CRM Tax Settings feature, update the tax rates in your tax list and apply the updated rates to new invoices. For the SaaS workaround, revise the tax rates in Stripe and edit existing customer subscriptions to apply the updated rates. You may also need to update your third-party Stripe integration settings to ensure accurate tax calculations during the checkout process.