Top 7 Reasons to Move to SaaS Sales Tax Software

It’s no secret that sales tax for SaaS is confusing. There’s a lot of red tape and little guidance from the states on whether certain SaaS products are taxed. That’s because SaaS products live online and can be sold to anyone with internet access.

So, what’s the solution to make things easier? How do SaaS companies stay compliant and on top of sales tax obligations? The answer is with SaaS sales tax software. This guide will explore the top reasons you should consider moving to an automated solution created and monitored by experts. Let’s dive in.

What Is SaaS in the US?

SaaS is a way for companies to deliver cloud-based services normally over the Internet instead of having to download software onto your computer. Different states and jurisdictions have different rules around what SaaS constitutes—downloadable software, tangible personal property, or something else.

The reason why most states see SaaS as tangible personal property is because it’s an electronic version of prewritten computer software that could be sold via disk or other means. Since SaaS is a new technology, we recommend consulting a state and local tax (SaLT) expert about your business’s specific use of SaaS and the expected taxability.

How to Know if You Need to File SaaS Sales Tax

As an online seller or SaaS startup company, it can be challenging to know when to register and file sales and use tax for your business. There are two leading indicators that you can use to guide you to stay sales tax compliant — having a physical presence in a state or economic nexus.

Physical nexus occurs when you have a physical presence in a state. This could include having your main business location, a warehouse, or even having employees in a state.

On the other hand, economic nexus thresholds are triggered when you hit a certain amount of sales or transactions in a calendar year. Most states either have a 200-transaction or $100,000 tangible sales nexus, but it varies by state. Some states also have economic nexus rules requiring both.

What to Do if You Have Sales Tax Nexus

Sales tax compliance is essential for every business, which is why it’s vital you know what to do when you reach nexus. After reaching nexus in a state, you must register with the appropriate tax authorities. Doing so will allow you to charge sales tax once registration is complete.

You will typically need the following to register with a state’s Department of Revenue or other tax agency:

• Federal Employer ID Number (EIN) or Social Security Number
• Business legal name
• Activity start date for your business
• Contact number for the owner or business representative
• Physical and mailing address

This is not an exhaustive list, and you may need other documents when registering your business for sales tax.

Free Download: Sales Tax Guide for SaaS

Understanding SaaS sales tax is no easy feat. That’s why we’ve compiled all the information you need to ensure your SaaS business is sales tax compliant.

Get the Guide

7 Reasons Why You Should Consider SaaS Sales Tax Software

Whether you sell SaaS services or digital goods, sales and tax regulations and rules are not straightforward. Every state, from California to Colorado, is different and has different tax rules that you’ll need to know inside and out. 

That’s where automated sales tax software comes in. It handles everything, from registering you in states when you reach nexus to calculating sales tax rates and filing and remittance. The best sales tax software also offers integrations that automatically connect to your storefront.

Want to know more reasons why you should consider SaaS sales tax software? Here are seven that will make you want to automate sales tax compliance for good.

1. Efficiency and Time Savings

How are you currently handling your sales tax? Is all your information across various spreadsheets to ensure your sales tax compliant? And how much time are you really spending? If you’re handling everything manually, there’s a solid chance you could miss something, including whether you’ve hit nexus in a state or not.

SaaS sales tax software handles your day-to-day tax management. This means you won’t have to spend hours worrying about SaaS and digital products taxability, sales tax calculations, nexus, registrations, or even filing and remittance. You’ll be able to get back to doing what your business needs — focusing on growth.

2. Flexibility for Your Business

Is your company rapidly expanding into new states or seeing an increase in orders? Most sales tax software solutions can grow with your company. This means that whether you’re a startup or rapidly scaling to every state, an automated solution can handle all your volume anytime.

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3. Tax Audit Preparedness

As a business, you never know when tax authorities may look into your returns and conduct an audit. Having SaaS sales tax software ensures that all your documents and everything you need are in one place. In addition, automated solutions like Zamp also provide notice management and an archive of historical data that is audit-ready at any time. 

4. Data Visibility

One of the best things you can do for your company as you grow is to know what’s going on and how it can impact your business. With automated sales tax software, you gain insights into your business, including where you have economic nexus, approaching nexus, and how much you’ve paid in sales tax. Using this data allows you to make informed decisions on various parts of your business, such as sales and marketing.

5. Constant Sales Tax Compliance

Have you been keeping up with changes in sales tax rates and laws? Sales tax is an ever-evolving and changing landscape. With 46 states and 13,000 tax jurisdictions, sales tax automation software can handle the heavy lifting for you.

6. Easy to Implement

Getting your sales tax software up and running only happens once. That means that once you’re done working with a solution like Zamp to get set up, you won’t have to worry about it. You’ll go from spending ten or more hours on sales tax per month to just a few minutes.

7. Technological Improvements and Updates

The best sales tax software companies are always looking to up their game. This means you’ll have access to new improvements and updates in real-time. This could include things like new integrations that work with different storefronts or provide you with new ways to analyze data and files.

SaaS Sales Tax Software: Conclusion

SaaS is complicated, but sales tax is even more challenging to handle. Each state has different laws regarding SaaS and how it’s viewed. Luckily, sales tax software exists to simplify the day-to-day management of sales tax collection for your business.

Why Zamp?

Zamp isn’t just another sales tax solution; we’re revolutionizing the industry by putting our customers first. And it shows — we’ve been named a Major Player in the Small, Mid, and Enterprise SUT markets in IDC’s 2024 IDC MarketScape for Worldwide SaaS and Cloud-enabled Tax Automation Software, along with being featured in the top ten best sales tax software companies by taxtech500.

Our full-service platform allows businesses to outsource their sales tax from start to finish. Our platform manages the complete sales tax lifecycle by offering:

• Hands-off onboarding: We set up everything for you and ensure it’s done right.
• Full sales tax compliance service: We offer nexus tracking, registrations, roof-top accurate calculations, product taxability research, mapping, reporting, and filing. All this is included in our pricing model — one fee for everything.
• Proactive account support: We are always looking for any changes in requirements, and our team is happy to answer any questions you may have.

See how you can save time and stay sales tax compliant with Zamp. Book a call below!

About the author

Emily Kordys

Emily Kordys is a Content Marketing Manager with seven years of experience in the sales tax, auto, and real estate industries. She currently resides in North Carolina with her boyfriend and dogs, Shadow and Copr.