Skip to main content
Contact us

Product/Service Taxability

Once you've established nexus, you must determine if your products/services are taxable

 

Understanding the taxability of your products and services is pivotal in maintaining compliance, unfortunately just like nexus, it differs from state to state.  

Expansion into new states, changing tax laws, new product launches, and acquisitions make taxability decisions challenging. There are over 12,000 taxing jurisdictions and many have their own unique set of rules and interpretations.  Lack of sales tax on a product or service appropriately could lead to significant exposure over time.

Take the following example:

  • Product / Service A is not taxed, but in reality should have been taxed.
  • Year 1 sales total $100,000 and grows 20% per-year over a three year period.
  • That’s $364,000 of sales over a three year period.
  • With an average tax rate of 8%, that’s over $29,000 of uncollected tax. 

An additional penalty and interest assessment would take the total exposure to close to $40,000. That’s a tough number for almost any business to cough up.

When you rely on the experts at TaxConnex®, you can ensure you understand your sales and use tax obligations in all states and jurisdictions, from establishing nexus to understanding your taxability. Having a trusted resource to ensure you remain compliant gives you ultimate peace of mind. 

Get in Touch →

 

 

 

 

Level Up side CTA

Contact TaxConnex®

Ready to have the chaos of sales tax conquered for your business? We're ready to help. Fill out the form to the right and we will be in touch!
 

Product & Service Taxability FAQs

  • How do I know if my products or services are taxable?

    Determining taxability requires evaluating your products or services against each state' sales tax laws. Factors such as delivery method, customer type, bundling, and product functionality can all affect whether sales tax applies. 

  • Can the same product be taxed differently in different states

    Yes. Sales tax laws can vary greatly by state, or even local jurisdiction, so the same product may be fully taxable, partially taxable, or exempt depending on the jurisdiction or state. 

  • Are services exempt from sales tax?

    Not always.  The taxability of services varies by state. While many services may be exempt, others are fully or partially taxable depending on the state.  Factors such as the type of service, how it is delivered, and the customer's use can all affect whether sales tax applies.  A state-by-state taxability review can help ensure your services are taxed correctly. 

  • Is SaaS taxable?

    It depends. 
    The sales tax treatment of Software as a Service (SaaS) varies by state. Some states fully tax Saas, others exempt it, and some apply tax based on factors such as how the software is accessed, delivered, or used.  Businesses selling SaaS should evaluate taxability on a state-by-state basis and consult an expert when they are not positive on the specifics for their business. 

    Learn more about the states that tax SaaS!