By Steve Sehy and Chris Livingston
A state-by-state breakdown of the ever-changing SaaS sales tax status
The states have been rapidly changing the sales tax environment for internet businesses, including Software-as-a-Service (SaaS). This includes changing the definitions and taxability of SaaS as well as the requirements for determining in which states a company needs to collect sales tax. Since none of this contributes to company revenue or income, the best-case scenario is breakeven, and the worst-case scenario includes paying sales tax to a state (10 percent or more of revenue) when you didn’t collect it, as well as penalties. While larger companies may have a team working on this, small to midsize SaaS companies are struggling to deal with this issue.