Configure your Stripe Account for Galvix

To enable Galvix to accurately calculate sales taxes and ensure compliance, you must configure your Stripe account to collect sales tax and correctly reflect the taxability of customers. This guide provides clear steps to enable sales taxes and mark customer taxability rules in Stripe.

What can this guide help with?

• Set Up Customer Taxability and Exemptions
• Testing an invoice in Stripe for tax determination
• Calculate taxes on Shipping
• Adding taxes on invoices created using Stripe APIs
• Next Steps

Set Up Customer Taxability and Exemptions

Galvix relies on the Tax Preference setting in Stripe to determine whether a customer is taxable or exempt. By default, customers should be marked as taxable unless they provide a valid exemption certificate (e.g., for government entities, schools, or nonprofits). Review all existing customers in Stripe to ensure accurate settings.

Taxable Customers

To review the taxability for a customer or to create a new customer with taxable preference, follow these steps -

1. Navigate to Customers in your Stripe account on the left-hand side
2. Create a new customer or edit an existing one
3. Click on Edit Information from the (...) three dots menu on the top right corner
4. Scroll to the Tax Status, select Taxable from the dropdown
5. Save the changes.

Galvix will apply this tax preference to ensure the correct sales tax is charged to the customer’s transactions.

Handling Tax Exemptions

Sales tax exemptions are a criteria that allow customers not to pay sales tax. Often, these customers are government entities, schools, or non-profit organizations. The customer must provide a valid exemption certificate confirming their status. If you have such customers who are exempt from sales tax, you must update their taxability status to Exempt in Stripe.

To review the taxability for a customer or to create a new customer with an exempt preference, follow these steps -

1. Navigate to Customers in your Stripe account on the left-hand side
2. Create a new customer or edit an existing one
3. Click on Edit Information from the (...) three dots menu on the top right corner
4. Scroll to the Tax Status, select Exempt from the dropdown
5. Save the changes.

Galvix will apply zero sales tax to transactions for exempted customers.

Calculate taxes on Shipping

To allow Galvix to determine and calculate taxes on Shipping related costs, you will need to create a service item in Stripe as there is a system limitation preventing tax calculations on shipping fees by default. Also, shipping will be required to be added as a line item in to your invoices.

1. Create Shipping as a Taxable Service Item:

• In Stripe, go to the Product Catalog section
• Click on +Create Product button
• Create Shipping as a product and Save

2. Assign relevant tax category to Shipping in Galvix

   For Galvix to determine correct tax rates based of taxability rules for your Shipping method, it is important to accurately map the tax category for the item in Galvix.

• In Galvix, go to the Products section
• Search for the Shipping item using the name used when creating the Product in Stripe
• Click on the item to update the tax category
• Click on Update Tax Category
• Under Tax Category, select the most appropriate shipping tax category
• Click Save

3. During invoice creation, add this product as a line item with the shipping amount.

Testing an invoice in Stripe for tax determination

Once you have completed connecting Stripe to your Galvix account and configured your Stripe account as per the steps suggested above, we suggest Issuing a test invoice or credit note in Stripe to test tax determination and ensure everything is working as expected.

Steps to Test an Invoice:

• In your Stripe account, navigate to Invoices
• Click on the +Create Invoice button to create a new invoice
• Select Add a Customer who is marked as Taxable in Stripe and has an active tax registration in Galvix for their jurisdiction
• Add a taxable Item to the invoice and save it
• Add Shipping as a line item if needed
• Once saved, allow a few seconds for Galvix to calculate tax and update the draft transaction in Stripe

• Once taxes appear correctly, you may print or send the invoice.
• Once finalized (invoice status in Stripe is updated), the transaction will sync into Galvix and appear under the Transactions tab.

⚠️You may Void or Delete the test invoice to avoid tax implications.

Adding taxes on invoices created using Stripe APIs

Whenever a new invoice is created in your Stripe account, Galvix automatically receives a webhook notification from Stripe containing the invoice details. Galvix then calculates and adds the applicable sales tax based on several factors:

• Your business's registration status in the destination state (determined by the customer's shipping or billing address)
• The taxability of the individual line items on the invoice
• The customer's tax exemption status

This process is fully automated and typically completed within a few seconds of invoice creation.

Ways to Create Invoices in Stripe

Stripe allows you to create invoices in three ways:

1. Using Stripe’s Dashboard (User Interface)
2. Using the Create Invoice API
3. Using the Create Subscription API (for recurring billing)

1. Creating Invoices via Stripe Dashboard

No additional setup is required when creating invoices through the Stripe UI. Stripe automatically creates these invoices in a draft state before finalizing them and sending them to the customer. This gives Galvix enough time to calculate and apply taxes before the invoice is finalized and charged.

2. Creating Invoices via API (Create Invoice or Create Subscription )

By default, invoices created using these APIs are finalized immediately and the associated payment method is charged automatically (collection_method = "charge_automatically" ). This may result in the payment being processed before Galvix has had a chance to apply sales tax, leading to undercollection of tax.

Recommended Configuration

To ensure Galvix can apply taxes correctly before payment is collected, set the collection_method to "send_invoice" when using the Create Invoice or Create Subscription APIs. This instructs Stripe to:

1. Create the invoice with collection_method set to "send_invoice"
2. Notify Galvix via webhook
3. Allow Galvix to:
   • Calculate and add the applicable sales tax
   • Update the invoice’s collection_method back to "charge_automatically"

Once Galvix completes these steps, Stripe will automatically charge the customer's payment method with the correct tax-inclusive amount.

Turning off invoice emails to customers unless taxes are added

If you would like to wait for the taxes to be added to the invoices by Galvix's tax determination engine, before the invoices are sent to the customer by email, kindly turn off 'Send finalized invoices and credit notes to customers' in Stripe.

Steps to turn off Customer emails:

• In your Stripe account, navigate to Settings
• Go to Billing > Subscription
• Scroll down to Subscription and emails->Manage invoices sent to customers
• Turn Off the toggle for Send finalized invoices and credit notes to customers

With these configurations, Galvix can accurately calculate sales taxes, generate return drafts, and keep your business sales tax compliant effortlessly!

Next Steps

Review our documentation on Best practices for invoicing in Stripe