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Calculate Sales Tax

This article applies to:Avalara AvaTax for Stripe Invoicing

AvaTax for Stripe Invoicing calculates sales tax for each line item and creates a combined sales tax line item on a document. AvaTax calculates sales tax on the following types of Stripe Invoicing document:

  • Tax inclusive invoice: the sales tax is included in the invoice amount
  • Tax exclusive invoice: the sales tax is not included in the invoice amount.

For example, if the invoice amount is $10 and the sales tax is 5%, then:

  • In the case of a tax inclusive invoice, the calculated sales tax is $0.48, the invoice amount is $9.52, and the final invoice amount is $10.
  • In the case of a tax exclusive invoice, the calculated sales tax is $0.50, the invoice amount is $10 and the final invoice amount is $10.50.

Note:

  • AvaTax calculated charges are inclusive of tax
  • For calculating Input VAT for European countries, the customer BIN (Business Identification Number) is required

Invoices in Stripe Invoicing are created in one of the following ways:

  • Programmatically by the host system or the payment gateway and sent to Stripe Invoicing; or
  • Manually in Stripe Invoicing

Learn how to use AvaTax for Stripe Invoicing to manually create invoices and calculate sales tax.

Manually create an invoice

For an invoice, AvaTax for Stripe Invoicing considers the metadata sent in the charge for sales tax calculation. If the invoice metadata isn't available, AvaTax for Stripe Invoicing considers the customer metadata. To manually create an invoice in Stripe Invoicing, follow these steps:

  1. Log in to Stripe Invoicing.
  2. On the Customer page, select a Customer.

    Stripe - 1 Customer - select customer.png

  3. On the Customer Details page, go to Pending invoice items and click + Add Invoice Item to create an invoice.

    Stripe - 3 Customer - create invoice.png

  4. In the Create new invoice item window, select the Currency, type the Amount, and add an item Description. If this is a recurring invoice, select Subscription.
  5. Click Create invoice item.
    Stripe - 4 Customer - create invoice item.png

Create a test invoice

If you change your configuration, create a test invoice to verify AvaTax is calculating sales tax correctly. To create a test invoice in AvaTax and view it in Stripe Invoicing, follow these steps:

  1. Go to the AvaTax for Stripe Invoicing website.
  2. On the Create Test Invoice tab, select a customer.
  3. Create an invoice. Change the currency and amount as needed. 

  4. Click Create Invoice. View this test invoice along with the sales tax details in Stripe Invoicing for the selected customer.

Create a recurring invoice/payment

The first Stripe Invoicing invoice gets paid immediately after creating a subscription. As a result, Stripe Invoicing closes the paid invoice, and AvaTax for Stripe Invoicing can't modify the closed invoice for sales tax calculation. The error message "Invalid invoice: This invoice is no longer editable" displays.

To ensure that the sales tax is calculated, set the "pay_immediately=false" flag while creating subscriptions. This prevents the Stripe Invoicing from paying the invoice for some time after your subscription is created, and AvaTax for Stripe Invoicing can update the first recurring invoice within this time frame.

Note:

Contact Stripe Invoicing Support to whitelist your Stripe Invoicing account with the 'pay_immediately' argument in Subscription functionality. 

Calculate sales tax

To calculate sales tax on an invoice in Stripe Invoicing, follow these steps:

  1. Log in to Stripe Invoicing.
  2. On the Customer page, select a customer.
  3. On the Customer Details page, go to Pending invoice items. Click Add Invoice Item, and then enter the invoice amount. Once the invoice is created, it appears in the Pending Invoice Items list. Select the invoice and click Invoice Now.

    Stripe - 5 Customer - pending invoice item.png

  4. In the Create Invoice window, confirm all the details and click Invoice now.

    Stripe - 6 Customer - invoice now.png

  5. On the Customer Details page. go to Invoices and open the invoice.

    Stripe - 7 Customer - invoice.png

  6. On the Invoice Details page, view the invoice details and the sales tax calculated by AvaTax.

    Stripe - 8 Customer - invoice with tax.png

  7. Close an invoice before it's paid. 
    1. On the invoice page, go to Status section and click Close.  The invoice Status changes to Closed.
    2. On the invoice page, go to Status section and click Forgive. The invoice Status changes to Closed and forgiven.   
    3. The status of the corresponding document in the Admin Console is changed to Void.

Calculate sales tax for charges

A charge is a payment, billable either to a customer, credit card, or a debit card. AvaTax for Stripe Invoicing considers the metadata sent in the charge for sales tax calculation. Using an invoice payment as an example, to calculate sales tax for a charge in Stripe Invoicing, follow these steps:

  1. Log in to Stripe Invoicing.
  2. On the Customer page, select a customer.
  3. On the Customer Details page, go to Payments, and then click Create Payment.

    Stripe_Charge_1_createpayment1.png

  4. In the Create a new payment window, enter the details, and then click Charge customer.

    Stripe_Charge_1_createpayment2.png

  5. On the Customer page, view the payment details and the sales tax calculated by AvaTax.

    Stripe_Charge_3_created.png

Refund a payment

  1. On the Customer page, view the payment details and the sales tax calculated by AvaTax.

    Stripe_Charge_3_created.png

  2. Click Refund Payment to refund the charge amount.
  3. Refund the whole or partial charge amount. In the Refund payment window, select one of the following options and click Refund.
    • Full refund
    • Partial refund: Type the Refund amount.

    stripe_refund_choice.png

  4. After a successful refund, a return invoice is automatically created in the Admin Console.

Calculate sales tax for an item with a discount

AvaTax for Stripe Invoicing considers the discount defined in Stripe Invoicing and calculates sales tax as applicable for each line item on a document.

  1. Log in to Stripe Invoicing.
  2. On the Customer page, select a customer.
  3. Create an invoice. 
  4. Add an item. If you have associated a discount to this line item, then the discount is applied while calculating sales tax.

    ST_discount_create_invoice.png
    The final invoice with tax calculated separately for items with discounts and items without discounts:
    ST_discount_inv_created_2lines.png

View an invoice in the Admin Console

  1. Log in to Admin Console.
  2. On the Transactions tab, select the company from the drop-down list. 
  3. Use the search filters to find the invoice.
    Stripe - 9 Customer - invoice in Admin Console.png