Monika Miles, SAAS And Cloud Computing And Taxes

When it comes to Software-as-a-Service (SaaS) companies, there’s often confusion regarding both nexus and the taxability of this revenue stream.

And while the recent Wayfair decision seems like it’s directed only at online sellers, traditional multi-state sellers (including those that generate revenue from SaaS and software) will also be affected, as nexus will be easier to establish. Once it is established – either by traditional physical presence or by sales volume, then companies will need to consider the taxability rules of SaaS in each state in which they have nexus.

Is SaaS even taxable? Because SaaS and cloud computing doesn’t always clearly fall into existing tax definitions, different states interpret its taxability in different ways. Some regard it as similar to electronically downloaded software, while others consider it a service, which may be taxable or not. And what about electronically downloaded software? Is it treated differently from SaaS?

This series will take a look at how key states in various regions of the country interpret SaaS, cloud computing and electronically downloaded software within their different state tax statutes. First up, the “Western” states: CaliforniaUtah and Washington!

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