SaaS Sales and Use Tax: Reconciling Varying State Rules to Avoid Unforeseen Tax Traps

Description

How various states tax sales of digital versions of a wide array of products and services, and source the receipts from those sales, presents one of the toughest challenges in corporate sales and use tax compliance. While most states impose sales tax on the sale or transfer of tangible personal property from sources outside their borders, an increasing number of states are taxing services, including SaaS.

Tax treatment of services varies widely among the states, with the majority of states relying on their revenue departments to issue rulings and notices in the absence of concrete legislation. Some states tax SaaS as tangible personal property; others treat SaaS as a service, and either impose or exempt it from tax, depending on their tax regimes. Still others treat SaaS as a service but apply special rules to its taxability.

The different treatments of SaaS provide significant challenges for corporate tax advisers. To ensure compliance, tax staff must understand myriad conflicting state laws, policies and trends in sourcing.

Listen as our panel of veteran tax advisers suggests strategies for fine-tuning your company’s sales and use tax compliance and planning in response to the dynamic and varying treatment of SaaS by state tax authorities.