Sales Tax on Software as a Service

Question

My site provides Software-as-a-Service (SaaS) for a monthly subscription.

Stripe collects all payments. Stripe will also calculate and collect sales tax where applicable.

The LLC is registered in Wyoming, and also registered as a foreign entity in California where the office is physically located.

The site may have customers in any given US state.

What is my responsibility in regard to collecting sales tax? Do I need to apply for a sales tax license/certificate in every US state, or can I rely on Stripe in this instance?

Answer 1

This is determined by the law of the individual state. The general rule is that a state can collect sales tax on sales in that state, if they have passed a law so requiring, see South Dakota v. Wayfair. A state may require the buyer to pay the sales tax in an out-of-state transaction, or it may put the collection and payment burden on the seller. Whether or not services are taxable is also determined by state law, see this article for some of the patterns across states. But, let's say that you have taxable sales in some state, where you bear the burden of paying – then you are responsible. The payment-collectors may take care of that for you as part of their service, but maybe they don't, so you would need to carefully read the contract to see what they do, and what liability they disclaim in case they screw up.