From California to Vermont: SaaS Sales Tax Variations Across States

Are you in the finance group of a SaaS company? Feeling a little uneasy about sales tax compliance? Don't worry, you're not alone. As SaaS company sales tax experts, we've seen this concern time and time again, not just in the United States, but internationally too. Why? Because SaaS taxation is a nuanced area where mistakes are common.

The SaaS Sales Tax Situation

Over 20 states and some local jurisdictions tax the SaaS revenue stream. Let's take a whirlwind tour of some interesting tax tidbits from across the United States:

California: Sales Tax Free Tech

Our home state of California doesn't tax the SaaS revenue stream, probably because we're pretty protective of our tech industry here!

Illinois: State vs. City

The state of Illinois doesn't tax SaaS revenue, but interestingly, the city of Chicago imposes a tax similar to sales tax on SaaS products.

Colorado: State vs. Cities

Colorado doesn't tax the SaaS revenue stream at the state level, but some of its cities like Boulder and Denver do.

Connecticut: Lower Rate for SaaS

Connecticut taxes SaaS, but at a lower rate than most of its other taxable products.

Texas: Partial Taxation

Texas considers SaaS as data processing services and taxes it at only 80% of the full sale value rather than 100%.

Vermont: The New Kid on the Block

Vermont is the latest state to join the SaaS tax club. As of July 1, 2024, SaaS is taxable in the Green Mountain State.

SaaS vs. Information Services

It's worth noting that states view SaaS and information services a bit differently. There's some nuance here, and we've helped many clients understand this classification to ensure they're properly categorized.

Need a Hand?

Does it sound like you could use some help? We're here for you. We offer:

- Nexus reviews

- Taxability studies

- Assistance in determining where your tasks will be processed

- Support in fixing current practices and achieving full compliance

Don't let SaaS sales tax compliance keep you up at night. At Miles Consulting Group , we've helped countless growing companies address these sales tax challenges. If your finance team is facing similar hurdles, we'd be happy to put our expertise to work for you. Reach out to learn how we can support your company's next chapter of growth.

About Monika and Miles Consulting

Monika is President and Founder of Miles Consulting with over 25 years of experience in multistate tax consulting (sales tax, income/franchise and credits & incentives), plus a few more in federal tax! Before starting the firm in 2002, Monika was a Senior Tax Manager at a Big 4 firm.

Miles Consulting Group is a professional services firm specializing in multi-state tax solutions, which addresses state and local tax issues, including general state tax consulting, nexus & taxability reviews, audit support, voluntary disclosure agreements, and other special projects.

We also specialize in SaaS and other technology industries. For more information, visit www.milesconsultinggroup.com and to contact us please call us at 408-266-2259 or email [email protected] .