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Sales of custom software - downloaded are subject to sales tax in West Virginia. Sales of customization of canned software are subject to sales tax in West Virginia. Sales of digital products are exempt from the sales tax in West Virginia.
Are services subject to sales tax in West Virginia? "Goods" refers to the sale of tangible personal property, which are generally taxable. "Services" refers to the sale of labor or a non-tangible benefit. In West Virginia, services are taxable unless specifically exempted.
Only two states Tennessee and Vermont have specific statutes in place to address SaaS transactions and sales tax.
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.
12. What sales sourcing rules does West Virginia follow? The general rule is that the transaction is sourced to the location where the purchaser receives the tangible personal property purchased or makes first use of the service purchased.
The sale of electronic data products such as software, data, digital books (eBooks), mobile applications and digital images is generally not taxable (though if you provide some sort of physical copy or physical storage medium then the sale is taxable.)
A nonexclusive list of organizations that are exempt from sales tax by other sections of federal or state law includes: federal or state chartered credit unions, regional transit authorities, county ambulance authorities, and non-profit public health care corporations.
Software-as-a-Service products The definition of SaaS sometimes falls in the gray area of digital service. West Virginia does tax SaaS products, but check the website to confirm that the definition firmly applies to your service.
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.
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.