Since states began taxing remote sellers based on sales volume, a SaaS company can create a filing obligation simply by selling to customers in that state. Many founders find out during diligence.
How the trigger works
Each state sets its own threshold, usually a revenue amount or a number of transactions within a year. Not every state taxes software, and the rules differ between downloaded software and software as a service.
What we do every quarter
- Map revenue by customer billing address
- Compare it against each state's threshold and taxability rules
- Register before the threshold is crossed, not after
- Set up collection in your billing tool and file returns on schedule
Thresholds and rules change. Treat this as an overview and confirm with a sales tax specialist for your states.
