Topic Guide
SaaS & Software Sales Tax
Software taxability turns on delivery method, the state, and how the offering is bundled. SaaS is taxed in some states and exempt in others, and the line moves often.
Software companies frequently misjudge taxability when they expand into new
states or change their delivery model. Confirm the controlling authority for
each state where you have customers before relying on a position.
The key variables
- Delivery method: downloaded, hosted/SaaS, or load-and-leave
- State treatment of prewritten vs custom software
- Bundling with taxable hardware or services
Multi-state pitfalls
- Sourcing to the customer's location vs the server location
- Economic nexus thresholds triggering collection duties
- Inconsistent exemption certificate handling across states