Sales Tax by State: Is SaaS Taxable?

by Jennifer Dunn

Last updated March 2021

Software as a service (SaaS) is a model where software is hosted in one place but licensed by subscription for use by customers. TaxJar, for example, is a SaaS-based business.

Like SaaS, sales tax can also be tricky, especially when you’re trying to figure out when and where your services are liable to sales tax.

Knowing that SaaS businesses have to protect their bottom line as well as reputation, the risk of being noncompliant is not an option. But just like many other “new” technologies, most states haven’t quite wrapped their hands around whether or not SaaS is taxable in their state.

For example, some states consider SaaS a service. So, if services are generally taxable in the state – such as in Arizona – then SaaS is considered taxable. In most states, where services aren’t taxable, SaaS also isn’t taxable. Other states, like Washington, consider SaaS to be an example of tangible software and thus taxable. Just like with anything tax related, each state has made their own rules and laws.

This list compiles all SaaS-related state sales tax laws at the time of this writing.

Important note: You’ll notice that some of the sources listed here are based on letter rulings. Letter rulings are interpretations of existing law made by states when the law doesn’t specifically cover an issue. As more states wise up to “new” business models like SaaS, the more likely they are to eventually amend their laws to expressly cover transaction types. So keep in mind that whether or not SaaS is taxable is subject to change. If you run into any states who handle SaaS taxability differently than we’ve indicated on this list, please leave a comment or contact us!

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The TaxJar API Handles SaaS Taxability

If you’re a SaaS provider and all this has your head spinning, don’t worry. The TaxJar API allows you to assign a product tax code to the products you sell. Find product tax codes here. When you assign this product tax code to to the SaaS services you sell, the TaxJar API automatically charges your customer in any state the right amount of sales tax depending on that state’s applicable SaaS sales tax laws. Ready to stop guessing that you’re charging the right rates and automate sales tax? To learn more about TaxJar and get started, visit

In Which States Should You Charge Sales Tax on SaaS Subscriptions?

Note: Some of the source links take you to long pages filled with state laws and legalese. If this is the case, search for “computer,” “computing,” or “software” to find the pertinent part of the state code.

Alabama – SaaS is considered a taxable service. Computer software is tangible personal property. (Source)

Alaska – SaaS is taxable in Alaska. (Source)

Arizona – SaaS is taxable in Arizona. (Source: Arizona Letter Ruling LR04-010)

Arkansas – SaaS is non-taxable in Arkansas. Both software delivered electronically is not considered taxable, and “the use of prewritten computer software in providing software programming services does not cause the programming services to become taxable unless tangible personal property is provided to the customer.” (Source)

California – SaaS is non-taxable in California since there is no transfer of tangible personal property. (Source)

Colorado – SaaS is non-taxable in Colorado because it is not delivered in a tangible medium. (Source)

Connecticut – SaaS is taxable in Connecticut. SaaS for personal use is taxed at the full state rate, but SaaS for business use is only taxed at the rate of 1%. (Source)

Florida – SaaS is non-taxable in Florida when it is only a service transaction and is not accompanied by the transfer of tangible personal property. (Source)

Georgia – SaaS is considered non-taxable in Georgia, because it is not one of the services enumerated as taxable and is not available in tangible media. (Source

Hawaii – SaaS (and computer services) is taxable in Hawaii. Hawaii’s general excise tax applies to every good and service not tax exempt. (Source)

Idaho – SaaS is non-taxable in Idaho. Remotely accessed computer software is not taxable, and digital subscriptions are not taxable. (Source – Rule 27)

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Illinois – SaaS is considered a non-taxable service. (Source

Indiana – SaaS is considered non-taxable in Indiana. A letter ruling from November 2016 said, “Cloud computing fees, remote storage fees, and data transfer fees were not subject to Indiana sales tax because the fees were paid for services and not for tangible personal property, specified digital products, prewritten computer software, or telecommunication services.” (Source)

Iowa – SaaS is taxable. Services arising from or related to installing, maintaining, servicing, repairing, operating, upgrading, or enhancing specified digital products are also subject to tax. (Source)

Kansas – SaaS is non-taxable. In Kansas, SaaS providers are referred to as “Application Service Providers” (ASPs). (Source

Kentucky – SaaS is non-taxable because it isn’t tangible personal property. (SaaS is not explicitly covered in Kentucky code, so this was confirmed with a call to the Kentucky Department of Revenue. Always be extra cautious when choosing not to charge sales tax based on unofficial guidance. Click here for contact information for the Kentucky Department of Revenue Division of Sales & Use Tax.)

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Louisiana – SaaS is taxable. (Source)

Maine – SaaS is considered tangible personal property and is taxable. (Source)

Maryland – SaaS is taxable in Maryland. (Source)

Massachusetts – SaaS and cloud computing are taxable in Massachusetts. (Source)

Michigan – SaaS is non-taxable in Michigan. (Source)

Minnesota – SaaS is non-taxable in Minnesota. (Source)

Mississippi – SaaS is taxable in Mississippi. (Source)

Missouri – SaaS is non-taxable in Missouri. (Source)

Nebraska – SaaS is non-taxable in Nebraska. (Source)

Nevada – SaaS is non-taxable in Nevada. (Source)

New Jersey – SaaS is non-taxable in New Jersey. (Source)

New Mexico – SaaS is taxable in New Mexico. (Source)

New York – SaaS is taxable in New York. (Source)

North Carolina – SaaS is non-taxable in North Carolina. (Source)

North Dakota – SaaS is non-taxable in North Dakota. 

Ohio – SaaS is taxable for business use in Ohio and non-taxable for personal use. (Source)

Oklahoma – SaaS is non-taxable in Oklahoma. (Source)

Pennsylvania – SaaS is taxable in Pennsylvania. (Source)

Rhode Island – SaaS is taxable in Rhode Island. (Source)

South Carolina – SaaS is considered a taxable service in South Carolina, as are other charges to access a website. (Source)

South Dakota – SaaS is considered a taxable service in South Dakota, as are other charges to access software. (Source)

Tennessee – SaaS is taxable in Tennessee. (Source)

Texas – SaaS is considered part of a data processing service and thus taxable in Texas.  (Source)

Utah – SaaS is taxable in Utah. (Source)

Vermont – SaaS is non-taxable in Vermont as of July 1, 2015. (Source)

Virginia – SaaS is non-taxable in Virginia. (Source)

Washington – SaaS is taxable in Washington since all software, delivered by whatever means, is considered taxable in the state. (Source)

Washington D.C. – SaaS is considered a taxable service in Washington D.C. (Source)

West Virginia – SaaS is considered a taxable service in West Virginia. (Source

Wisconsin – SaaS is non-taxable in Wisconsin. (Source)

Wyoming – SaaS is non-taxable in Wyoming, since the purchaser does not have permanent use of the product. (Source)

If you need to charge sales tax on a SaaS product in your online store, the TaxJar API takes all of these state laws into account and makes your job simple.

Ready to eliminate your sales tax headaches?

Schedule a demo

To learn more about how sales tax affects your SaaS business and guide you through the steps to compliance, here’s a checklist specifically created for SaaS businesses to help you understand the complexities around SaaS sales tax. To learn more about TaxJar and get started automating your sales tax compliance, visit

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SaaS Sales Tax Checklist