Certain states can be audit hot spots for software-as-a-service (SaaS) companies. Want to figure out sales tax in NY? Questions about tax in TX? Read on for a round up of sales tax rates, nexus details, and things you should know about 5 popular states that tax SaaS.
Did you know:
Connecticut has a special 1.00% tax rate for B2B computer and data processing services (which include SaaS)
New York requires an exact pre-payment prior to the sales tax filing
Pennsylvania allows you to prorate the tax charged based on how many people are using the software in the state
Only 80% of the software sale is taxable in Texas
Washington has one of the highest average combined tax rates in the country
This guide covers sales tax rate by state and some of the intricacies of tax on software in Connecticut, New York, Pennsylvania, Texas, and Washington.
Importantly, SaaS is treated as data processing services in Texas, which permits 20% of the sales value to be exempt. Anrok automatically fetches the appropriate local tax rate and applies it to only 80% of the sales amount for SaaS transactions.