Multi-region SaaS tax evaluation

Research summary and compressed findings for a Multi-region SaaS tax evaluation (US, current through late 2025/early 2026). This submission collects state-level taxability patterns for SaaS, nexus rules, marketplace facilitator status, multistate income/apportionment considerations, payroll/withholding nexus, and a practical compliance checklist you can use to build the requested blog/newsletter content for US business owners and LLC founders.

Key conclusions (compressed): - SaaS taxability is a patchwork: many states treat SaaS as taxable (as digital goods, prewritten software, or data processing), many do not (treating SaaS as an intangible service), and some apply conditional rules depending on customer type or delivery method. - As of late 2025, approximately half of U.S. jurisdictions tax SaaS in some form (TaxCloud reports "24 states tax SaaS in some form as of October 2025").

Examples: New York and Texas (taxable—Texas taxes SaaS under data processing rules, partially taxable), Washington and Hawaii (tax digital services), California and Florida more often treat SaaS as non-taxable. - Nexus: Post-Wayfair economic nexus rules require remote sellers to collect if thresholds are met.

Thresholds vary by state (commonly $100k or $250k, sometimes transaction-count tests). Physical presence (employees, servers, offices) still creates nexus; remote employees can create payroll/withholding and possibly income/franchise tax nexus. - Marketplace facilitator laws: Most states have marketplace facilitator rules requiring platforms to collect/store/ remit tax for marketplace sales; this impacts SaaS if sold via marketplaces or app stores—check each state’s MFA rules and effective dates. - Bundling and ancillary services: When SaaS is bundled with taxable items (e.g., software sold on media, taxable tangible property) or with taxable professional services/implementation, states may tax the bundle unless charges are separately stated.

Itemized invoicing reduces risk. - Income/franchise tax and apportionment: Multistate apportionment rules matter for corporate income/franchise tax — sales factor sourcing generally follows customer location; MTC work on digital product definitions and state approaches is actively evolving and affects apportionment sourcing for digital businesses. - Compliance steps that materially reduce risk: map customer locations, monitor state economic nexus thresholds and employee locations, register promptly where nexus is triggered, implement automated tax calculation and filing or work with a CSP/SST provider for participating states, keep clear invoices and exemption certificates, consider VDAs for historical exposure, and maintain an audit-ready record retention policy.

Recommended state-level callouts to include in the blog (examples readers will find actionable): - California: SaaS generally not subject to sales tax (intangible); still monitor nexus and local taxes. - Texas: SaaS/data processing is taxed (Texas Comptroller guidance) — Texas treats many cloud/software charges as partially taxable (e.g., data processing tax base rules). - New York & Massachusetts: Prewritten software and remotely accessed software often treated as taxable—verify DOF bulletins and local rulings. - Washington & Hawaii: Broader taxation of digital products and services — watch MTC/state developments. - States with no statewide sales tax (AK, DE, MT, NH, OR) still require vigilance for local/municipal taxes (Alaska localities) and use tax for customers.

Practical checklist to include in the blog for US business owners and LLC founders:

Key conclusions (compressed):

- As of late 2025, approximately half of U.S. jurisdictions tax SaaS in some form (TaxCloud reports "24 states tax SaaS in some form as of October 2025"). Examples: New York and Texas (taxable—Texas taxes SaaS under data processing rules, partially taxable), Washington and Hawaii (tax digital services), California and Florida more often treat SaaS as non-taxable. - Nexus: Post-Wayfair economic nexus rules require remote sellers to collect if thresholds are met.

SaaS taxability is a patchwork: many states treat SaaS as taxable (as digital goods, prewritten software, or data processing), many do not (treating SaaS as an intangible service), and some apply conditional rules depending on customer type or delivery method.
Marketplace facilitator laws: Most states have marketplace facilitator rules requiring platforms to collect/store/ remit tax for marketplace sales; this impacts SaaS if sold via marketplaces or app stores—check each state’s MFA rules and effective dates.
Bundling and ancillary services: When SaaS is bundled with taxable items (e.g., software sold on media, taxable tangible property) or with taxable professional services/implementation, states may tax the bundle unless charges are separately stated. Itemized invoicing reduces risk.
Income/franchise tax and apportionment: Multistate apportionment rules matter for corporate income/franchise tax — sales factor sourcing generally follows customer location; MTC work on digital product definitions and state approaches is actively evolving and affects apportionment sourcing for digital businesses.
Compliance steps that materially reduce risk: map customer locations, monitor state economic nexus thresholds and employee locations, register promptly where nexus is triggered, implement automated tax calculation and filing or work with a CSP/SST provider for participating states, keep clear invoices and exemption certificates, consider VDAs for historical exposure, and maintain an audit-ready record retention policy. Recommended state-level callouts to include in the blog (examples readers will find actionable):
California: SaaS generally not subject to sales tax (intangible); still monitor nexus and local taxes.
Texas: SaaS/data processing is taxed (Texas Comptroller guidance) — Texas treats many cloud/software charges as partially taxable (e.g., data processing tax base rules).
New York & Massachusetts: Prewritten software and remotely accessed software often treated as taxable—verify DOF bulletins and local rulings.
Washington & Hawaii: Broader taxation of digital products and services — watch MTC/state developments.
States with no statewide sales tax (AK, DE, MT, NH, OR) still require vigilance for local/municipal taxes (Alaska localities) and use tax for customers. Practical checklist to include in the blog for US business owners and LLC founders:

Inventory product offerings and identify taxable vs non-taxable components (SaaS subscription, implementation/consulting, software license, physical media).

Map customers and employees by state; track monthly and YTD sales and transaction counts by state.

Monitor economic nexus thresholds and register before the first filing deadline once thresholds are exceeded.

Choose whether to collect sales tax or have customers self-report (risk-based; often collection is required where nexus + taxability exists).

Use tax automation (TaxCloud, TaxJar/Stripe Tax, Avalara, others) or CSP/SST providers for states that participate in the Streamlined Sales Tax program.

Separate invoices for taxable vs nontaxable charges and retain exemption certificates.

For past exposure, discuss Voluntary Disclosure Agreements with a tax advisor to limit look-back and penalties.

Review income/franchise tax apportionment rules and payroll withholding rules for states where you have employees—consult state-specific guidance or a multistate tax advisor.