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Only two states Tennessee and Vermont have specific statutes in place to address SaaS transactions and sales tax.
Under Arizona case law, software is treated as tangible personal property.
The majority of states which have addressed the issue and have concluded that software (at least unbundled software) is not tangible personal property for ad valorem tax purposes and therefore is generally not taxable.
Providing prewritten or canned computer software, whether or not characterized as a license agreement is a taxable retail sale.
A131964 Appellate Court reversed lower court decision and holds that the right to replicate and install software is a property right, which is an intangible.
California: SaaS is not a taxable service. However, software or information that is delivered electronically is exempt. The ability to access software from a remote network or location is exempt. Under California sales and use tax law, there must be a transfer of TPP, in order to have a taxable event.
A software maintenance agreement, or SMA, is a legal contract that obligates the software vendor to provide technical support and updates for an existing software product for their customers. It may also extend the expiration date of certain features, such as new releases or upgrades.
In most states, where services aren't taxable, SaaS also isn't taxable. Other states, like Washington, consider SaaS to be an example of tangible software and thus taxable. Just like with anything tax related, each state has made their own rules and laws.
Arizona does impose sales and use tax on SaaS and cloud computing. Prewritten computer software or canned software, which includes software that may have originally been written for one specific customer but becomes available to others, are also taxable and considered sales of tangible personal property.
A software license agreement details how and when the software can be used, and provides any restrictions that are imposed on the software. A software license agreement also defines and protects the rights of the parties involved in a clear and concise manner.