Whether software as a service (SaaS) is subject to sales tax depends on the state. As of September 2026, 22 states and DC tax SaaS in full or in part, 23 states generally do not, and 5 states have no statewide sales tax. California and Colorado, both counted among the 23 for now, start taxing SaaS on January 1, 2027. A few states split the answer: Texas taxes 80% of the charge, Connecticut taxes business use at 1%, Ohio taxes only business use, Iowa exempts qualifying business customers, and Wisconsin exempts remote access to software on the vendor's server but taxes software downloaded to the customer's equipment.
Two things decide whether you owe tax in a state: whether the state treats your product as taxable, and whether you have nexus there. This guide covers the first question for every state and points to the second. It is educational information, not tax advice. Rules change, so confirm your specific product with the state or a tax professional.
SaaS taxability by state (2026)
"SaaS" here means prewritten software that the customer uses over the internet while the code stays on the provider's servers. Downloaded software, software on physical media, and custom software are often treated differently, and those differences are noted where they matter.
| State | SaaS status | Rate and specifics | Key official source | Guides |
|---|---|---|---|---|
| Alabama | Not taxable | Rule 810-6-1-.37 taxes software licenses and transfers "regardless of its function or form of transmission" (4% state plus local). The rule does not address remotely accessed software, and Alabama has no published ruling that taxes or exempts hosted SaaS. The Department of Revenue is generally understood not to tax access with no transfer of software, so confirm with the Department before you rely on it. | Ala. Admin. Code r. 810-6-1-.37 | Alabama SaaS sales tax |
| Alaska | No state sales tax; local tax can apply | Alaska has no state sales tax, but remote sellers collect local sales tax in jurisdictions that belong to the Alaska Remote Seller Sales Tax Commission and levy one. The Commission's Interpretation 2021-03 treats software downloads, digital products, SaaS and streaming as taxable remote sales delivered into a member jurisdiction. Local codes vary. | ARSSTC Interpretation 2021-03 | Alaska sales tax guide |
| Arizona | Taxable | Transaction privilege tax at 5.6% state plus county and city tax. Arizona treats prewritten software transferred by remote telecommunications as tangible personal property. | ADOR TPT rate table (5.6% state rate); Model City Tax Code § 115.10 | Arizona sales tax guide, Arizona SaaS |
| Arkansas | Not taxable | Prewritten software delivered electronically is exempt; software on physical media is taxable. | A.C.A. § 26-52-304; DFA taxability matrix | Arkansas sales tax guide, Arkansas SaaS |
| California | Taxable from Jan 1, 2027 | SB 122 taxes prewritten software and SaaS from 2027. Before then, software transferred by remote telecommunications with no tangible storage media is not a taxable sale. | CDTFA Reg. 1502(f)(1)(D) | California sales tax guide, California SaaS |
| Colorado | Not taxable (state) through 2026; taxable from Jan 1, 2027 unless exempt; home-rule cities vary | Not taxed at the state level today, but home-rule cities such as Denver and Boulder administer their own sales tax and may tax SaaS. HB26-1223 repeals the downloaded software exemption from January 1, 2027, leaving only custom software and software under a negotiable license agreement exempt, and the Department of Revenue is writing implementing rules. | CDOR computer software topic, July 2026 tax policy updates | Colorado sales tax guide, Colorado SaaS |
| Connecticut | Taxable (reduced rate for business use) | 1% for business use as a computer and data processing service; 6.35% for personal use. | CT DRS, services subject to tax | Connecticut sales tax guide |
| Delaware | No sales tax | Delaware levies a gross receipts tax on sellers, not a sales tax on buyers. | Delaware Division of Revenue | Delaware sales tax guide |
| District of Columbia | Taxable | Taxed as data processing services. The general rate is 6%; a scheduled increase to 7% has been postponed to October 1, 2027. | DC OTR, data processing services, OTR sales and use tax | DC sales tax guide |
| Florida | Not taxable | The Department of Revenue has advised that subscriptions to remotely accessed software and cloud services are not taxable when no tangible property is delivered. | TAA 16A-014 | Florida sales tax guide, Florida SaaS |
| Georgia | Not taxable | Sales and use tax does not apply to software as a service, which Georgia defines as software accessed online by subscription. The rule, effective May 6, 2025, taxes certain digital goods such as digital books and audio works that carry a permanent right to use. | Ga. Comp. R. & Regs. 560-12-2-.118 | Georgia sales tax guide, Georgia SaaS |
| Hawaii | Taxable (GET) | General excise tax of 4%, plus a 0.5% county surcharge where levied. GET is imposed on the seller, which may pass it on. | Hawaii Tax Facts 2019-1 | Hawaii sales tax guide |
| Idaho | Not taxable | Remotely accessed software is excluded from tangible personal property. | Idaho Code § 63-3616(b) | Idaho sales tax guide |
| Illinois | Not taxable (state); Chicago taxes it | Cloud access with nothing downloaded is not subject to state sales tax. Supplying a downloaded API, applet, or agent can change that. Chicago's Personal Property Lease Transaction Tax applies at 15% (see below). | IDOR Letter Rulings | Illinois sales tax guide, Illinois SaaS, Chicago SaaS |
| Indiana | Not taxable | Prewritten software that is only accessed remotely is not a retail transaction. Downloaded software is taxable. | Indiana SIB 8 | Indiana sales tax guide |
| Iowa | Taxable (business-use exemption) | 6% state plus local option tax. Exempt when sold to a commercial enterprise for its exclusive use. | Iowa DOR digital products and software guidance; Iowa Code § 423.3(104) | Iowa sales tax guide |
| Kansas | Not taxable | Hosted software where the customer receives no copy is not a taxable sale. Downloaded prewritten software is taxable. | KDOR Pub. EDU-71R | Kansas sales tax guide |
| Kentucky | Taxable | 6%. "Prewritten computer software access services" became taxable January 1, 2023. | KY DOR Sales Tax Facts, June 2022 | Kentucky sales tax guide |
| Louisiana | Taxable | Prewritten computer software access services became taxable January 1, 2025, at state and local (parish) rates. | LDR FAQ, what are prewritten computer software access services, LDR FAQ, new taxable services | Louisiana sales tax guide |
| Maine | Not taxable | Remotely accessed software on an out-of-state server, with nothing downloaded, is not a taxable sale. | Maine Rule 326 (18-125 CMR 326) | Maine sales tax guide |
| Maryland | Taxable | 6% as a digital product; 3% when licensed solely for use in an enterprise computer system (from July 1, 2025). Sales between members of the same affiliated group are exempt from July 1, 2026. | Comptroller Technical Bulletin 56 | Maryland sales tax guide |
| Massachusetts | Taxable | 6.25%. Business buyers using the software in several states can apportion under multiple-points-of-use rules. | 830 CMR 64H.1.3 | Massachusetts sales tax guide, Massachusetts SaaS |
| Michigan | Not taxable (browser-only access) | Not taxable when the customer uses the software without a download. Delivering a desktop agent or local app can make it taxable at 6%. | RAB 2023-10 | Michigan sales tax guide, Michigan SaaS |
| Minnesota | Not taxable | Subscriptions to online-hosted software are not taxable. Prewritten software transferred to the customer is. | MN Revenue, computer software and digital products | Minnesota sales tax guide |
| Mississippi | Not taxable if hosted outside Mississippi | Since July 1, 2023, software maintained on a server outside Mississippi and accessible only over the internet is not a taxable retail sale or use (SB 2449). Software hosted on servers in Mississippi, and downloaded software, remain taxable at 7%. | SB 2449 (2023); MS DOR 2023 legislation summary | Mississippi sales tax guide |
| Missouri | Not taxable | SaaS agreements are not sales of tangible personal property, and 12 CSR 10-109.050(2)(I) says the sale of software as a service is not subject to tax. | Letter Ruling 8250 (2023), 12 CSR 10-109.050(2)(I) | Missouri sales tax guide |
| Montana | No sales tax | Montana has no general sales tax. Designated resort communities levy a local resort tax of up to 3% on lodging, food and drink, recreation and luxury goods, not on software. | Montana DOR, general sales tax, local resort tax | Montana sales tax guide |
| Nebraska | Not taxable | Software furnished to the customer is taxable however it is conveyed (5.5% state plus local). Nebraska taxes tangible personal property and enumerated services, and access-only SaaS with no transfer of software is not among them, but Nebraska has no published ruling that says so. | Neb. Reg. 1-088 | Nebraska sales tax guide |
| Nevada | Not taxable | Nevada taxes tangible personal property, and the Department of Taxation says products delivered electronically, such as software, are not subject to sales or use tax. Software on a disk or other physical media is taxable. | Nevada Department of Taxation sales tax FAQ | Nevada sales tax guide |
| New Hampshire | No sales tax | No general sales tax. | NH DRA | New Hampshire sales tax guide |
| New Jersey | Not taxable (except information services) | Most SaaS is not taxable because nothing is delivered. SaaS that meets the definition of an information service is taxable at 6.625%. | NJ TB-72 | New Jersey sales tax guide, New Jersey SaaS |
| New Mexico | Taxable (GRT) | Gross receipts tax applies to licenses to use software; state GRT rate 4.875% plus local. | NM TRD, PST Services decision | New Mexico sales tax guide |
| New York | Taxable | 4% state plus local. A license to remotely access prewritten software is taxable. | NY TB-ST-128 | New York sales tax guide, New York SaaS |
| North Carolina | Not taxable | Remotely accessed software is not taxable because no software is delivered. | NCDOR SUPLR 2021-0005 | North Carolina sales tax guide, North Carolina SaaS |
| North Dakota | Not taxable | Prewritten software is taxable when sold or leased, including when delivered electronically or by load and leave, and custom software is generally exempt. Hosted access with no transfer of software is not on the statute's list of taxable items, but North Dakota has no ruling that addresses SaaS by name. | N.D. Cent. Code ch. 57-39.2, ND guideline GL-21825 | North Dakota sales tax guide |
| Ohio | Taxable for business use | 5.75% state plus county rates when bought for use in business, as automatic data processing or electronic information services. Not taxable for personal use. | R.C. 5739.01(B)(3)(e) | Ohio sales tax guide, Ohio SaaS |
| Oklahoma | Not taxable | Electronically delivered prewritten software is exempt; a September 2026 letter ruling applied the exemption to subscription charges for a hosted, remotely accessed platform where no software is transferred to the customer. | Okla. Stat. tit. 68, § 1357(32); OTC LR-26-012 | Oklahoma sales tax guide |
| Oregon | No sales tax | No general sales tax. | Oregon DOR | Oregon sales tax guide |
| Pennsylvania | Taxable | 6% state, plus 1% in Allegheny County and 2% in Philadelphia. Canned software is taxable whether downloaded or accessed remotely. | PA DOR canned software guidance | Pennsylvania sales tax guide, Pennsylvania SaaS |
| Rhode Island | Taxable | 7% on vendor-hosted prewritten computer software. | RI Division of Taxation ADV 2018-38 | Rhode Island sales tax guide |
| South Carolina | Taxable | Taxed as a communications service at 6% plus local, per Department of Revenue rulings. | SC PLR 20-4 | South Carolina sales tax guide |
| South Dakota | Taxable | 4.2% state plus municipal tax. South Dakota taxes products transferred electronically and most services. | SD DOR, products transferred electronically | South Dakota sales tax guide |
| Tennessee | Taxable | 7% state plus local. Remotely accessed software used in Tennessee is taxable. | Tenn. Code Ann. § 67-6-231; Notice 15-14 | Tennessee sales tax guide |
| Texas | Partially taxable | Taxed as a data processing service, but 20% of the charge is exempt, so tax applies to 80%. 6.25% state plus up to 2% local. | Tex. Tax Code § 151.351; Rule 3.330 | Texas sales tax guide, Texas SaaS |
| Utah | Taxable | License fees for remotely accessed prewritten software are taxable when the software is used in Utah. | Utah Publication 64 | Utah sales tax guide |
| Vermont | Taxable | 6% state plus local option tax. Prewritten software is tangible personal property however it is accessed. | 32 V.S.A. § 9701(7) | Vermont sales tax guide, Vermont SaaS |
| Virginia | Not taxable | Services that do not involve an exchange of tangible personal property are exempt, and Virginia Tax treats cloud software that way. Proposals to tax digital products have come up in recent sessions, so confirm current law. | Va. Code § 58.1-609.5 | Virginia sales tax guide, Virginia digital products |
| Washington | Taxable | Remote access software is a digital product subject to retail sales tax (6.5% state plus local) and retailing B&O tax. Since October 1, 2025 (ESSB 5814), digital automated services, custom software and customization of prewritten software, and IT support and training are also retail sales, and the Department of Revenue waives penalties, not interest, through December 31, 2026. | WA DOR, digital products | Washington sales tax guide, Washington SaaS |
| West Virginia | Taxable | An exemption covers electronic data processing services and specialized software that only lets a customer's terminal communicate with the provider's system; software that assists the customer's own business decisions, which describes most SaaS, is taxable. | W. Va. Code St. R. § 110-15-76 | West Virginia sales tax guide |
| Wisconsin | Depends | Charges for accessing prewritten software on the vendor's server are not taxable when the customer does not operate or control the server and the provider is not selling a taxable product or service. Prewritten software downloaded to the customer's equipment is taxable. | Wisconsin DOR, computer software FAQ; WI Publication 240 | Wisconsin sales tax guide |
| Wyoming | Not taxable | Prewritten software is taxable tangible personal property, and specified digital products are taxed only when the purchaser has permanent use. Hosted access with no transfer of software is not on that list, but we found no Excise Tax Division ruling that addresses SaaS by name. | Wyoming Legislature, Sales Tax 101 (June 2023), Wyoming Excise Tax Division | Wyoming sales tax guide |
Chicago's lease tax on SaaS
Illinois does not tax pure cloud access at the state level, but the City of Chicago does. Chicago's Personal Property Lease Transaction Tax applies to the "non-possessory lease of a computer to input, modify, or retrieve data supplied by the customer," which the city applies to many SaaS subscriptions used in Chicago. The rate has been 15% since January 1, 2026, up from 11% in 2025 and 9% before that.
The city lists exemptions that can matter to SaaS sellers. These include use primarily outside Chicago (with an apportionment affidavit), leases between 100%-related companies, and charges that are mainly for information rather than computer use. The tax is reported on Form 7550. See our Chicago SaaS sales tax guide and the city's PPLTT page.
States with partial or customer-dependent rules
- Texas: tax applies to 80% of the charge for data processing services, including SaaS (Tex. Tax Code § 151.351). See Texas SaaS sales tax.
- Connecticut: business use is taxed at 1% as a computer and data processing service; personal use is taxed at 6.35%.
- Ohio: SaaS is taxed only when bought for use in business. Consumer subscriptions are not taxed. See Ohio SaaS sales tax.
- Iowa: SaaS is taxable, but sales to a commercial enterprise for its exclusive use are exempt.
- Maryland: 6% generally, 3% for SaaS used solely in an enterprise computer system.
- New Jersey: most SaaS is not taxed, but SaaS that is an information service is.
How to determine whether your SaaS is taxable
Work through these questions for each product and each state where you have customers.
- Is anything delivered to the customer? Many states that exempt SaaS still tax software that is downloaded or delivered on physical media. A desktop agent, installed client, or backup copy on a drive can change the answer, as Michigan's and Illinois' guidance shows.
- How does the state classify it? States tax SaaS under different theories: tangible personal property (Pennsylvania, New York, Utah), a data processing or information service (Texas, DC, Ohio), a digital product (Washington, Maryland), a communications service (South Carolina), or a specifically named service (Kentucky, Louisiana). The theory affects which exemptions apply.
- Who is the customer? Business-use rules in Ohio, Connecticut, Iowa, and Maryland change the answer or the rate based on the buyer. Resale and exempt-organization certificates apply in every state that taxes SaaS.
- What is bundled with it? Implementation, training, support, and data services can be taxed differently from the subscription. Some states tax the whole bundle when a taxable item is included, so itemize separately priced services.
- Where is the software used? Most states source SaaS to the customer's location. Several (including Massachusetts, Ohio, Pennsylvania, and Washington) allow business customers with users in multiple states to apportion.
- Do you have nexus? Taxability matters only where you must collect. Most states use a $100,000 sales threshold, and some still count transactions. Some count only taxable sales, so a seller of exempt SaaS may not reach the threshold at all. Check each state's economic nexus rules.
What to do next
- Map your products. List each plan, add-on, and service, and record how it is delivered and billed.
- Check nexus. Compare your sales by state with each state's threshold, including the states where your SaaS is exempt.
- Register where required. Register before you collect tax, and keep exemption and resale certificates on file for business customers.
- Configure billing by state and product. Apply the correct taxability, rate, and any partial-base rule (such as Texas's 80%) at the customer's address.
- Watch for changes. Kentucky, Louisiana, Maryland, and Washington all changed how they tax SaaS or related services between 2023 and 2025, and California and Colorado both start taxing SaaS on January 1, 2027 (California, Colorado). See sales tax changes effective January 1, 2027 for the other enacted changes.
- Clean up past exposure. If you should have collected in prior periods, a voluntary disclosure agreement can limit penalties and lookback.
Kintsugi monitors nexus, applies state-by-state SaaS taxability rules at checkout or in billing, and files returns. See Kintsugi for SaaS.
State SaaS sales tax guides
- California SaaS sales tax
- Colorado SaaS sales tax
- Florida SaaS sales tax
- Georgia SaaS sales tax
- Massachusetts SaaS sales tax
- Michigan SaaS sales tax
- New Jersey SaaS sales tax
- Ohio SaaS sales tax
- Pennsylvania SaaS sales tax
- Washington SaaS sales tax
- Texas SaaS sales tax
- New York SaaS sales tax
- Illinois SaaS sales tax and Chicago SaaS sales tax
- North Carolina SaaS sales tax
- Arizona SaaS sales tax
- Arkansas SaaS sales tax
- Vermont SaaS sales tax
- Virginia sales tax on digital products
Frequently asked questions
Is SaaS taxable in every state?
No. As of September 2026, 20 states and DC tax SaaS in full or in part, 17 states generally do not, and 5 states (Alaska, Delaware, Montana, New Hampshire, and Oregon) have no statewide sales tax. Treatment in the remaining 8 states is not clearly settled in official guidance.
Which states tax SaaS?
Arizona, Connecticut, the District of Columbia, Hawaii, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, New Mexico, New York, Ohio (business use), Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas (80% of the charge), Utah, Vermont, and Washington.
Is SaaS taxable in California?
Not through 2026, but yes from January 1, 2027. SB 122 makes prewritten software and SaaS taxable then. See California SaaS sales tax.
Is B2B SaaS taxed differently from B2C SaaS?
In some states. Ohio taxes SaaS only when it is bought for use in business, Connecticut taxes business use at 1% instead of 6.35%, Iowa exempts qualifying commercial enterprises, and Maryland applies 3% to SaaS used solely in an enterprise computer system. Elsewhere, business and consumer buyers are generally treated the same unless the buyer has an exemption or resale certificate.
Does Chicago tax SaaS?
Yes. Chicago's Personal Property Lease Transaction Tax applies to non-possessory computer leases, including many SaaS subscriptions, at 15% as of January 1, 2026, even though Illinois does not tax pure cloud access at the state level.
Do I need to register in a state where SaaS is exempt?
Usually not for the SaaS itself, but it depends on the state's nexus rules and whether you sell anything else that is taxable there. Georgia, for example, requires registered dealers to file even when all their sales are exempt.
How is SaaS sourced when users are in several states?
Most states source SaaS to the customer's location, usually the billing or service address. Massachusetts, Ohio, Pennsylvania, and Washington have rules that let business customers apportion tax based on where their users are.
Sources
- California Department of Tax and Fee Administration, Regulation 1502
- City of Chicago Department of Finance, Personal Property Lease Transaction Tax
- DC Office of Tax and Revenue, Sales tax on data processing services and Sales and use tax (October 2026 increase postponed to October 1, 2027)
- Florida Department of Revenue, TAA 16A-014
- Iowa Department of Revenue, Taxation of specified digital products, software, and related services
- Kentucky Department of Revenue, Sales Tax Facts, June 2022
- Maine Revenue Services, Rule 326
- Maryland Comptroller, Technical Bulletin 56
- Massachusetts DOR, 830 CMR 64H.1.3
- Michigan Department of Treasury, RAB 2023-10
- Minnesota Department of Revenue, Computer software and digital products
- Mississippi Legislature, SB 2449 (2023)
- Missouri Department of Revenue, Letter Ruling 8250
- New Jersey Division of Taxation, TB-72
- New York Department of Taxation and Finance, TB-ST-128
- Ohio Revised Code, § 5739.01
- Pennsylvania Department of Revenue, Canned computer software and digital goods
- South Carolina Department of Revenue, Private Letter Ruling 20-4
- Texas Comptroller, Data processing services
- Utah State Tax Commission, Publication 64
- Washington Department of Revenue, Digital products
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