Mississippi Reverses Its Stance On Taxing SaaS

As businesses both utilize and develop technology product including electronically downloaded software and cloud computing or Software-as-a-service (“SaaS”), the taxability of these products continues to be varied and can be confusing.

The SaaS model continues to be a very popular method of delivering software to users. If you are a frequent reader of our blogs, you know that many states tax the SaaS revenue stream and many do not. In this article, we take a look at how the rules in Mississippi have recently become more defined in this space and the state has changed its taxability of SaaS.

The taxability of SaaS in MS largely depends on the nature of the specific software being provided to customers. The state of Mississippi, currently taxes the SaaS revenue stream. One caveat is that the SaaS product needs to be hosted on a server owned by the customer located in Mississippi.

Effective July 1, 2023, as outlined in SB 2449, Mississippi will exempt the SaaS revenue stream from sales tax. Furthermore, it will exempt remotely accessed SaaS (computer software located on a server outside of the state and accessed only via the internet) from sales and use tax. That means that SaaS subscription revenue received from Mississippi customers will not be subject to sales tax, even if the seller has met the nexus thresholds in the state.
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