Our multi-state tax experts have experience with software as a service (SaaS) company’s sales and use tax, state income and franchise tax compliance and reporting. We have proven experience with performing nexus analysis and providing tax strategies to mitigate hefty tax liabilities.
Computer software is the engine behind our ability to utilize our computing and digital platforms efficiently.
Most states have enacted sales tax collection requirements after a U.S. Supreme Court ruling in favor of the state of South Dakota v. Wayfair, particularly creating a compliance headache for e-commerce businesses. The ruling allows states to require all out-of-state sellers to collect and remit sales tax on taxable goods (if sales exceed $100,000 or 200 transactions). This ruling also hit software service providers particularly hard because their presence of online sales to anyone across the country left their business vulnerable to other state tax liabilities, like state income/franchise taxes.
Whether licensing or purchasing the software for proprietary ownership; even whether using cloud-based platforms like Software-as-a-Service (SaaS) or Platform-as-a-Service (PaaS), states are becoming savvier at identifying the digital footprint of a software company to establish a connection to their state for sales tax collection requirements and state income/franchise tax liabilities for selling this service to resident customers.