Software As A Service Saas Tax. Traditionally prewritten software has been treated by states as tangible personal property and as such the sale or lease of such software to an end user was generally subject to sales tax. It is sometimes referred to as on-demand software and was formerly referred to as software plus services by Microsoft.
Instead SaaS providers are acting as servicemen and therefore do not incur ROT. Knowing when to charge VAT is extremely important because it is not always necessary to charge VAT. Downloadable software is downloaded after a customer purchases the software or a license and most states also consider this type of software tangible -- and therefore taxable.
Software-as-a-Servicealso known as SaaS.
Software-as-a-service is taxed in 17 states partially taxed in 2 states and taxed only if the provider has a server in that state in 8 states. 2 view the sale of SaaS as the taxable electronic delivery or constructive possession of prewritten software ie tangible personal property. This is the type of software well address in this article. In New York SaaS constitutes the sale of canned or prewritten computer software and thus is taxable as a sale of tangible personal property.