SaaS Sales Tax: Part II – Sourcing Sales

  • Technology
  • 3/31/2024

Contributing Author, Steve Claflin, Manager, SALT (State and Local Tax) Back to Introduction When a factory in Michigan ships its product to a customer in North Caro...

Contributing Author, Steve Claflin, Manager, SALT (State and Local Tax)

  • Multiple Points of Use – Many states recognize that a sale of 100 software licenses may not be properly sourced to a single state. In light of this, a purchaser may be able to provide documentation substantiating where the users are actually located, allowing the seller to source the sale to multiple states. Alternatively, a state may allow a buyer to provide an exemption certificate to the seller, claiming multiple points of use, which then requires the buyer to submit use tax in the various jurisdictions where the licenses are used.
    • Sufficiency of a 5 Digit Zip Code – Many sellers do not collect the entire address of a buyer, but instead only have a 5 digit zip code which is used to validate the payment method. In many states, this zip code will be enough to obtain the proper local rate. However, in some states such as Washington or Colorado, a single zip code may potentially fall in one of several different jurisdictions with different local rates.

    But wait – There’s more! – Are the activities even taxable in the state? Keep reading —> SaaS Sales Tax – Part III Taxability

    This blog contains general information and does not constitute the rendering of legal, accounting, investment, tax, or other professional services. Consult with your advisors regarding the applicability of this content to your specific circumstances.

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