LookupTax vs. Stripe Tax: The Default is Costing You
For B2B businesses, that 'Enable Stripe Tax' button could be your most expensive mistake.
If you use Stripe for payments, you have seen the button in your dashboard: "Enable Stripe Tax."
It feels like the logical default. One click, and your tax headaches disappear, right?
For many B2B businesses, that single click is their most expensive mistake.
Stripe Tax is an incredible engine for calculation (figuring out if a zip code in Texas has a 6% or 8% rate). But for Tax ID Validation, it is often overkill—and overpriced.
Here is the honest breakdown of LookupTax vs. Stripe Tax.
1. The Pricing Model: Revenue Share vs. Utility Cost
This is the biggest shock for growing teams.
Stripe Tax typically charges a percentage of your revenue (often 0.5% per transaction where tax is calculated) plus active usage fees.
If you process a $10,000 B2B contract, Stripe Tax could cost you $50 just to tell you "Yes, this customer is in Germany."
It taxes your volume, not your complexity.
LookupTax charges for Utility Usage:
- We charge per validation check (fractions of a cent).
- Whether that customer pays you $10 or $100,000, the validation cost is the same (~$0.0149).
The Math: If you validate a customer once and bill them monthly for 5 years, LookupTax costs you pennies. Stripe Tax takes a cut every single month.
2. The "0% Tax" Paradox
If you sell B2B (Business-to-Business), most of your international transactions are likely 0% Tax (Reverse Charge).
❌ With Stripe Tax
You validate the ID. You charge $0 tax. But you often still pay the transaction fee to facilitate this $0 tax event. You are effectively paying a premium for a transaction where no tax was collected.
✅ With LookupTax
You validate the ID once at signup, store the result, and never pay again. No recurring fees on 0% tax invoices.
3. The Validation Gap: EU/UK/AU vs. The World
Stripe's documentation is transparent about this: they offer automatic verification (Database Checks) primarily for the EU (VIES), UK (HMRC), and Australia (ABN).
For many other regions, Stripe relies on Format Checks (Regex). Does the number look right?
LookupTax is built for the global economy. We go beyond the "Core Western" markets:
Saudi Arabia
Stripe: Format check
LookupTax: Database check
Singapore
Stripe: Format check
LookupTax: Database check
India
Stripe: Format check
LookupTax: Database check
If you are selling globally, a format check isn't enough to stop fraud. You need to know if that ID is active right now.
4. The "Ecosystem Lock-in"
Stripe Tax works like magic... as long as you never leave Stripe.
But modern businesses are complex:
- You might accept PayPal for some regions.
- You might send manual Invoices or Wire Transfers for enterprise deals.
- You might use a separate billing engine like Chargebee or Recurly.
Stripe Tax cannot easily validate IDs for transactions happening outside of Stripe. You end up with a fragmented process: automated tax for credit cards, manual chaos for wires.
LookupTax is Payment Agnostic:
- We are just an API.
- You can use us to validate an ID on a Stripe checkout, a PayPal form, a HubSpot quote, or a manual Excel sheet.
- We don't care where the money moves; we just ensure the customer is real.
Comparison Cheat Sheet
| Feature | LookupTax | Stripe Tax |
|---|---|---|
| Pricing | ✅ Flat / Usage (~$0.0149 per check) | ⚠️ % of Revenue (0.5% per transaction) |
| Database Verification | ✅ Global (EU, UK, AU + Saudi, SG, IN, etc.) | ⚠️ Limited (Primarily EU, UK, AU) |
| B2B Economics | ✅ Excellent. Validate once, bill forever | ⚠️ Expensive. Recurring fees on 0% tax invoices |
| Payment Agnostic | ✅ Yes. Works with PayPal, Wires, Invoices | ⚠️ No. Locked to Stripe ecosystem |
| Finance Tools | ✅ Excel / Sheets Add-ins | Dashboard Only |
The Verdict
Stick with Stripe Tax if:
You are a B2C Marketplace with high transaction volume in the US/EU, complex physical nexus rules, and you are happy to pay a premium to have everything handled inside one dashboard.
Switch to LookupTax if:
You are primarily B2B SaaS (where most invoices are 0% reverse charge). You sell to high-growth markets like Asia or the Middle East and need real database verification. You want to stop paying a percentage of your revenue just to validate a Tax ID.
Get Started Free →Stop Paying a 'Tax' on Your Tax Tool
Switch to a dedicated validator. Pay per check, not per dollar of revenue.