Updating tax rates on Stripe subscriptions
When you create a subscription in Stripe, the tax rate must be calculated when the subscription is first created.
If the tax rate changes or your customer changes their billing address, this could require some changes to the subscription to ensure the correct tax rate is applied.
- Tax-inclusive pricing: No further action is required. You’ll see the updated tax rates applied on your invoices for future charges and subscriptions.
- Tax-exclusive pricing: When you add tax on top of your subscription price, Quaderno can automatically update that tax if it changes.
On the preferences page, you can activate the option Update Stripe subscriptions automatically if a tax rate changes. Quaderno will automatically update your subscriptions in Stripe. Please note, this will affect the final amount your customers are charged.
Technical points to keep in mind
- The update occurs when Stripe renews the subscription and creates the draft invoice. Specifically, Stripe notifies us about the event (a draft invoice has been created). Quaderno automatically checks the draft invoice and the associated subscription. If Quaderno detects your subscription is using a deprecated tax rate or a tax rate that doesn't match the customer's jurisdiction, we'll update the tax rates or the metadata accordingly. Stripe automatically closes the invoice and charges the customer.
- When a tax rate needs to be updated on a subscription, Quaderno will always create a new tax rate object in Stripe. Quaderno will not use your existing tax rates.
- As a security measure, Quaderno only update taxes, but it never removes them. If you'd like to remove taxes on subscriptions, this would need to be done manually in your Stripe account. Quaderno would only remove taxes if it identifies a transaction as reverse-charge.
- If your subscription is set up as “tax-exclusive” in Stripe with a 0% tax rate, Quaderno still updates the tax rate accordingly.
- If there is conflicting tax rate metadata on the subscription, Quaderno will remove the tax rate metadata. Quaderno will not modify other metadata.