Software-as-a-service (SaaS) products are a sticky subject within tax law, even more so once economic nexus gets thrown into the mix.
Most of the complication is due to the different SaaS definitions state to state, in addition to little uniformity when it comes to SaaS tax legislation. Additionally, while SaaS has grown in popularity as a delivery method over the last handful of years, legislation has been slow to catch up. However, over 20 states now assess sales tax on the SaaS revenue stream, but for different reasons.
In this article we’ll discuss the taxability of SaaS in 18 key states.
1. Taxability of SaaS in California
Economic Nexus Provisions: Yes
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