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California is one of the few states to tax only physical goods. This means that digital goods and services, including SaaS, are generally not taxable in the state, unless the service includes creating a physical item. The way digital products are categorized can change from state to state and city to city.
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.
Under current Indiana tax laws, SaaS is not taxable but some digital goods are. Determining the taxability of your specific product is an important step in ensuring compliance with state tax laws and regulations.
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.
Tax-exempt goods Examples include most non-prepared food items, prescription drugs, and medical supplies. We recommend businesses review the Sales Tax Information Bulletins put forth by the Indiana Department of Revenue to stay up to date on which goods are taxable and which are exempt, and under what conditions.
SaaS sales tax rates for every state Alabama. AL. 4.00% Yes. No. Alaska. AK. 0.00% Yes. Yes, locally. Arizona. AZ. 5.60% Yes. Yes. Arkansas. AR. 6.50% Yes. No. California. CA. 7.25% Yes. No. Colorado. CO. 2.90% Yes. Yes, locally. Connecticut. CT. 6.35% No. Yes. Delaware. DE. 0.00% No. No.
SaaS and other digital products are generally not taxable in Kansas, though the state does tax traditional downloaded software.
Indiana is restricted from taxing internet access services.