Understanding bottom-up vs top-down reporting in Taxually

Overview

When setting up your Stripe account with Taxually, it's important to understand how tax reporting works. This article explains the two different approaches: bottom-up and top-down. You'll be able to choose the one that fits your setup. 

⚠️ A Quick Note About Enabling Tax in Stripe

If you're using Stripe Tax, we recommend enabling it on the 1st day of the month. Turning it on mid-month may result in missing or incomplete tax data, which can affect your filings.

Bottom-up Reporting (Default)

Bottom-up (tax recorded) builds your return based on the exact tax amounts collected on each transaction, as calculated by Stripe Tax.

How it works: 

• Stripe Tax is enabled for the entire filing period
• Each transaction includes the tax calculated for the customer’s jurisdiction
• Taxually aggregates the transaction-level data to generate your return

When bottom-up applies: 

• Stripe Tax is fully enabled and configured 
• You want full audit traceability and accurate reporting
• You collect tax at the point of sale

✅ The tax is collected from your customers: you're not paying it out of your revenue. 

Top-down Reporting (On Request)

Top-down (taxable sales) is used when tax wasn't calculated at the point of sale — either because Stripe Tax was not enabled or not properly configured for some transactions. 

How it works: 

• You provide your gross sales totals per jurisdiction
• Tax is imputed (back-calculated) based on those totals
• You are responsible for paying the tax amount from your revenue, as it wasn't collected from the customer 

When top-down applies: 

• Tax should have been calculated, but wasn't
• You still need to file a return in a jurisdiction where you're registered
• You want to stay compliant despite missing tax data

⚠️ Top-down reporting reduces your margin, since the tax is paid out of the total sale amount (which was not tax-exclusive)

What Should You Do?

• If Stripe Tax was enabled for the full period, Taxually will automatically prepare your return using the bottom-up method.
• If Stripe Tax was not enabled—or was turned on partway through— you may need to use the top-down approach for that period to stay compliant.