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The charge for a software maintenance contract, which provides updates and future releases, is a contract for the sale of tangible personal property and is taxable.
SaaS is generally always taxable in Washington.
Goods that are subject to sales tax in Washington D.C. include physical property, like furniture, home appliances, and motor vehicles. Prescription and non-prescription medicine, groceries, and gasoline are all tax-exempt. Some services in Washington D.C. are subject to sales tax.
Services Subject to Sales and Use TaxReal Property Maintenance Services.Landscaping.Data Processing Services.Information Services.Current Tax Rates. Sales and Use Tax.
WHO MUST FILE A D.C. PARTNERSHIP FORM D-65. Except for partnerships required to file an unincorporated business fran- chise tax return, D.C. Form D-30, all partnerships engaged in any trade or business within the District of Columbia or which received income from sources within the District, must file a D.C. Form D-65.
Under D.C. Mun. Regs. 9 §474.4, the sale, rental, or maintenance of computer software continues to be subject to sales tax in the District whether the software is canned, prepackaged, or customized.
Software-as-a-Service products The definition of SaaS sometimes falls in the gray area of digital service. Washington DC does tax SaaS products, but check the website to confirm that the definition firmly applies to your service.
Examples of other real property services include landscaping, garbage removal, building or grounds cleaning, janitorial services, structural pest control and real property surveying. Real property services that involve repair are generally taxable services.
In other words, Software-as-a-Service as a cloud-computing program that is only accessed remotely without delivery of a tangible media and does not include the user taking possession of the program is not subject to sales or use tax.
In addition to federal income taxes, taxpayers in the nation's capital pay local taxes to the District of Columbia. These include a district income tax, with rates ranging from 4% to 10.75%, a 6% sales tax and property taxes on real estate. The District has an average effective property tax rate of 0.56%.