## Tax Examples

This section provides examples to illustrate how revenue recognition works with tax considerations in Stripe.

### Tax Exempt

Customers can have a tax exemption status of either "exempt" or "reverse." In both cases, no tax is calculated on the invoice.

**Example:**

A customer with a "reverse" tax exemption status starts a monthly subscription on January 1st at 00:00:00 UTC. The subscription costs $31 USD per month and has a 10% tax-inclusive rate. Since the customer is tax-exempt, the total amount due is $27.90 USD. The subscription generates an invoice, which is finalized, and the customer pays the invoice on the same day.

Your journal entry would look like this:

| Account | Debit | Credit |
|---|---|---|
| Revenue | +$27.90 |  |
| Cash |  | +$27.90 |

### Tax-Inclusive Rate on Invoice Items

An invoice item can include a tax-inclusive rate. When you add an invoice item to an invoice, it can use the same accounting period or a different accounting period from its creation date.

**Example (Same Accounting Period):**

A customer starts a service for a period of 1 month on January 1st at 00:00:00 UTC. The total amount due is $34.10 USD, with a 10% tax-inclusive rate. You add the invoice item to an invoice on January 1st, the invoice finalizes, and the customer pays the invoice on the same day.