Sales Tax on SaaS. What I Learned, and You Should Know!
I was presenting at the OpenView CFO Forum in Boston (on SAAS contracts) last week to their portfolio companies, and at the conference I learned quite a lot from the Grant Thornton tax presenters about the current state of confusion of the applicability of SAAS sales tax. GT wrote a short article on it, so I thought it was worth sharing on my blog, as their article was on point and timely (plus I thought I would provide my 2 cents worth).
My takeaways from the article are:
1) Current State: Most states have not specifically addressed taxation of software-as-a-service transactions, and so you have to shoehorn it into their existing rules (i.e. it is messy and a grey area). You understand, as your hosting company is in x state, you are in y state and your customer is in z state.
2) Form of Agreement Matters: The form of agreement you use matters (is it a ‘software license agreement,’ ‘subscription services agreement,’ ‘professional services agreement,’ or something in between), but of course so does the substance of the services you are providing.
3) Proposed Federal Legislation: There is no answer yet, but there is a bill going through Congress which could help provide some clarity and predictability on taxation of SAAS. Here is the latest on the bill (at least on one website).
Take a read of the short Grant Thornton article, as I think they nailed the current state of things–even if there is no clear …