Sales tax glossary
Is SaaS taxable?
SaaS taxability is whether a state taxes software-as-a-service, meaning software accessed online rather than downloaded or delivered on physical media. States disagree: some tax SaaS as software or a digital service, some exempt it, and some tax only part of the charge or only certain uses.
Example
A SaaS company sells the same subscription to customers in two states. One state treats it as taxable software and the other as a nontaxable service, so only one invoice includes sales tax.
Why it matters for sellers
SaaS companies often cross economic nexus thresholds before they realize their product is taxable. Taxability can depend on how the product is delivered and billed, so review it state by state.
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Related terms
This definition is general information, not tax or legal advice. Rules vary by jurisdiction and change over time.
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