Monika Miles- What You Need To Know About The Taxability Of SAAS In Northeastern States

Are you curious if you need to be paying taxes on or charging your customers sales tax on your sales of these revenue streams: Software-as-a-Service (SaaS), cloud computing and electronically downloaded software? The answer is, maybe. Because these three areas are defined differently by each state, it’s important to understand how each state’s tax codes approaches them.

Being aware of the tax ramifications in any state your company has established nexus is incredibly important, especially considering the Wayfair decision from earlier this summer. While the U.S. Supreme Court’s decision may seem like it was only directed at online sellers, the truth is that multi-state sellers (such as those generating revenue from SaaS and software) are also affected. Because of the ruling, it will be even easier to establish nexus in more states across the country; companies need to know which taxes they’re responsible for in regards to SaaS, cloud computing and electronically downloaded software.

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Monika Miles, Software As A Service Taxes
When it comes to Software-as-a-Service (SaaS), cloud computing and electronically downloaded software, do you need to collect sales tax from your customer, or pay use tax on purchases?

Well, it depends. Some states define these as services, tangible property or none of the above; you need to take a look at each state’s statutes, regulations or other guidance to answer the question.

Another important factor to be aware of is the recent Wayfair decision from the U.S. Supreme Court earlier this summer. While it may seem to only apply to online sellers, the ruling will also affect traditional multi-state sellers that generate revenue from SaaS and software. Because the decision makes it easier to establish nexus, companies will need to be very aware of the taxability rules regarding SaaS, cloud computing and electronically downloaded software in any state in which they have nexus.

Today is the third in our series of how various states approach the taxability of SaaS, cloud computing and electronically downloaded software. Keep reading to find out how three states in the Southeast (Florida, Georgia and South Carolina) tax these items, and check out our previous posts details about states in the west!

SaaS and Cloud Computing Rules in Southeastern States

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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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