Illinois Software as a Service Subscription Agreement
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How to fill out Software As A Service Subscription Agreement?
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FAQ
Illinois does not impose tax on SaaS delivered via a cloud-based system, provided the transaction does not include a transfer of tangible personal property.
IAAS PROVIDER'S TAX OBLIGATIONSSales Tax is not applicable when an agreement for IaaS does not provide for the transfer of tangible personal property or provide for taxable services to any property owned by the customer.
Despite the Illinois Department of Revenue's historically complex stance on the taxation of computer software, the Department has now stated that SaaS is not subject to sales tax in Illinois. In other words, cloud-based software is not subject to tax in Illinois.
Illinois sales and use tax generally doesn't apply to charges for subscription services because subscription receipts aren't derived from a transfer of ownership of tangible personal property to a purchaser.
Any custom software that is delivered through electronic means or via the load and leave method is not considered tangible personal property nor subject to sales tax. However, it is only tax-exempt if separately stated on the invoice from charges for manuals, disks, CDs or other tangible property, which is taxable.
The sale at retail, or transfer, of canned software intended for general or repeated use is taxable, including the transfer by a retailer of software which is subject to manufacturer licenses restricting the use or reproduction of the software.
1, 2020 was 5.25%.) The tax also applies to all cloud-based products such as platform-as-a-service (PaaS), infrastructure-as-a-service (IaaS) and SaaS.
Illinois does not impose tax on SaaS delivered via a cloud-based system, provided the transaction does not include a transfer of tangible personal property.
Requirements for prewritten software are still subject to sales and use tax regardless of the method of delivery (whether with a physical medium, downloadable or accessed via the Internet) or if possession or control is given.
In the state of Illinois, any modified software which is held for general or repeated sale or lease is considered to be taxable. Sales of digital products are exempt from the sales tax in Illinois.