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But, in most, it's a mixed bag. California exempts most software sales but taxes one type: canned software delivered on tangible personal property an actual object you can touch or hold, such as a disc. Nebraska taxes most software sales with the exception of one type: SaaS.
Sales of custom software - delivered on tangible media are exempt from the sales tax in California. Sales of custom software - downloaded are exempt from the sales tax in California.
Only two states Tennessee and Vermont have specific statutes in place to address SaaS transactions and sales tax. Several states have ping-ponged on their decisions, the most recent being Michigan, who ultimately decided to exempt it.
In addition, sales of prewritten software, computer hardware, and hardware and software maintenance contracts involving software updates, upgrades and fixes are generally subject to the Massachusetts sales and use tax under the rules provided in the regulation.
Sales of prewritten computer software, regardless of the method of delivery, are subject to the Massachusetts sales tax. SaaS, cloud computing and electronically downloaded software are all taxable in the state because the object of the transaction is acquiring the right to use the software.
Prewritten computer software is taxable as tangible personal property, whether it is sold as part of a package or as a separate component, regardless of how the software is conveyed to the purchaser.
Ideally, all software purchases should be taxable to final users and exempt for business users. Instead, states tax some kinds of software and exempt others, based on whether it is customized or off-the-shelf and whether it is on CD or downloaded, all silly distinctions for tax purposes.
Sales of digital products are exempt from the sales tax in Massachusetts.
In California, sales of electronic products such as data, digital images, e-books, mobile applications, and software generally aren't taxable because there's no transfer of tangible personal property.
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.