Software-as-a-Service (SaaS)

Definition

A software delivery model in which applications are hosted in the cloud and accessed via subscription rather than installed locally on a user's device. From a tax perspective, SaaS has historically been treated differently than tangible software across states, with many states either exempting it or debating whether it constitutes a taxable sale of software or a nontaxable service. As more states move to tax SaaS, businesses and CPA firms must track their subscriptions carefully for sales tax compliance purposes.