What are my sales tax responsibilities if my company provides SaaS?

Software as a Service (SaaS) sales tax rules vary significantly by state. Whether you need to charge and remit sales tax depends on where your customers are located and how that state classifies SaaS. ## What SaaS means: SaaS is software that is hosted centrally and licensed to customers by subscription, rather than sold as a downloaded product. ## How states treat SaaS: Some states treat SaaS as a taxable service. Generally, if services are broadly taxable in a state, SaaS tends to be taxable there too. Other states treat SaaS like tangible software and tax it on that basis, while states that do not tax services at all often do not tax SaaS either. ## Digital products are separate: Digital products, such as ebooks, music, movies, and digital subscriptions, are often taxed under their own rules and are generally treated differently from SaaS. ## What to check before collecting tax: If you sell SaaS to customers in multiple states, review each state separately to confirm: 1. Whether you have crossed that state's sales tax threshold, also called economic nexus. 2. Whether SaaS is taxable in that state. 3. Whether the state distinguishes between downloaded software and software accessed online. ## How to confirm current rules: Because state rules change frequently, doola recommends checking SaaS taxability against a maintained sales tax reference or working with a sales tax specialist. doola partners with Kintsugi for sales tax registration and compliance.