## Collecting Taxes for Recurring Payments

Stripe offers two primary solutions for calculating and collecting taxes on recurring payments: **Stripe Tax** and **Tax Rates**.

### Stripe Tax

Stripe Tax is a paid product that automates tax calculations for your transactions. It requires no manual definition of rates or rules. Fees are only incurred after you've established at least one location where you are registered to calculate and remit taxes.

### Tax Rates

Tax Rates is a free feature that allows you to manually define a fixed set of tax rates. These can be applied to invoices, subscriptions, and one-time payments made through Checkout. Stripe will not create or maintain these tax rates on your behalf.

### Integrating with Third-Party Tax Providers

If you utilize a third-party tax provider such as Avalara, Anrok, or Sphere, you can connect them natively through a third-party tax app. This allows for automatic tax calculation for subscriptions and invoices.

### Collecting Taxes on Subscriptions

To collect taxes on recurring payments, you can integrate Stripe Tax with Stripe Billing. This integration automatically handles tax calculations, taking into account your pricing model, prorations, discounts, trials, and other subscription-specific features.

**Key Steps for Collecting Taxes on Subscriptions:**

1.  **Activate Stripe Tax:** Ensure Stripe Tax is set up and configured with your tax settings.
2.  **Collect Customer Location Data:** Stripe Tax requires your customer's location to determine the relevant taxes.
    *   Customers outside the US need at least a country-level address.
    *   Customers in the US require a 5-digit postal code.
    *   Customers in Canada require either the province or postal code.
    You can add this information through the Customer details page in the Dashboard or directly within the Invoice Editor.
3.  **Preview Tax Amounts:** Before creating a subscription, you can preview the estimated tax amount and total. This can be done server-side, either before or after collecting the customer's address.
    *   **Before Address Collection:** You can create a preview invoice and set `customer_details.tax.ip_address` to allow Stripe to estimate the customer's location based on their IP address. *Note: IP address-based location is an estimate and may not always be precise.*
    *   **After Address Collection:** Once you have the customer's address, you can use it for a more accurate tax preview.
4.  **Create Subscription with Stripe Tax Enabled:** When your customer is ready to pay, create the subscription with Stripe Tax enabled to ensure automatic tax calculation.

### Migrating Existing Subscriptions to Stripe Tax

If you are integrating Stripe Tax and have existing subscriptions, you will need to update them to ensure tax is automatically calculated going forward. Stripe provides tooling to help with this process, or you can manually update subscriptions for more granular control.

**Note:** Stripe does not prorate tax changes. These updates take effect at the start of the next billing cycle.