Industries | State and Local Tax

Sales Tax Compliance for Software

Sales Tax Compliance for Software Companies

The definition and taxability of Software and SaaS products can vary greatly by state. Some states consider SaaS tangible personal property (TPP), while others choose to exempt it based on specific qualities and business models (e.g., subscriptions).

Source Advisors can help your Software or SaaS company stay on top of the latest multistate sales tax rules and regulations. We’ve helped numerous companies tackle challenges like Sales Tax Audits, Software Implementation, and Ongoing Sales Tax Compliance.

Check out our Case Studies to learn how our clients successfully mitigate and manage sales tax challenges.

Is SaaS Taxable in My State?

It can be cumbersome, especially during early or rapid growth periods, for companies to stay on top of the unique and ever-changing sales tax policies, state-by-state product definitions, and exemptions for SaaS and software products.

Get a high-level look at the taxability of SaaS.

Understanding sales tax responsibilities as a software company is only one part of the equation. Our team can build a custom sales tax strategy based on what you sell and how you deliver and charge for your products and services.

Our tax experts also assist with sales tax audits, audit defense and software implementation so you can automate the tax calculation and returns filing processes.

What is a SaaS product?

SaaS or “Software-as-a-Service” can have a different definition depending on the taxing jurisdiction and is often classified by the way the product is delivered or used. In general, SaaS products are not downloadable and are accessed through a platform or cloud-based system. Customers usually pay a regular subscription fee to use the service.

Popular SaaS products include Hubspot, Slack, Salesforce, and DropBox.

Common Sales Tax Mistakes

Forgetting to collect and remit sales tax

Consequence: Your business may unintentionally become non-compliant.

Not utilizing an automated sales tax solution

Consequence: Your business exhausts valuable manpower and risks human error tracking numerous tax rates within each jurisdiction.

Disputing audits without the help of sales tax specialists

Consequence: Your business may strain internal resources, or make errors that can cause problems down the road and incur fines or penalties from unpaid sales tax on software.

The Source Advisors Advantage

State and local tax services at Source Advisors are completed by distinguished experts with decades of cumulative experience solving large and small tax challenges. Put Source Advisors’ track record of successful strategies and solutions to work for you. Schedule your free 30-minute, no-obligation consultation with our specialized team of professionals today.