If you are seeing your billing is slightly higher than what is advertised this is due to sales tax or VAT tax that we are required to collect and readmit as software company.

Today, 24 states tax SaaS services, and an additional 7 states tax SaaS if customers are required to download software. Each state has come to this conclusion in different ways.

For example, some states consider SaaS a service, not a product. So, if services are generally taxable in the state—such as in Hawaii—then SaaS is likely to also be taxable.

In states where services aren’t taxable, SaaS is unlikely to be taxable. Other states, like Washington, consider SaaS to be an example of tangible software and is deemed taxable. In addition, certain states tax SaaS at a different rate depending on whether it’s being used for personal or business purposes. SaaS companies must be aware of how their offering is taxed in all the states where they have customers.