The short answer
There is no single answer to whether you owe sales tax on digital products or SaaS in the United States. Every state decides for itself, and 2026 moved the goalposts: Utah’s SB 162 took effect July 1, 2026, newly taxing streaming, subscriptions, and seller-hosted software (SaaS), while California’s SB 122 — approved June 2026 — brings digital products and remotely accessed software into the tax base starting January 1, 2027. Roughly 25 states now tax SaaS in some form, and the trend is one-directional: states keep expanding their bases.
(Quick note: this is general information, not professional tax advice. Sales tax rules shift often — confirm with your state’s department of revenue or a tax professional before you file.)
If you sell downloads, subscriptions, templates, courses, or software from your own website, this article gives you three things: the new laws that changed the map this year, a state comparison table you can actually use, and a worked example showing how one solo SaaS founder figures out where she owes what.
Why 2026 changed the map
For decades, state sales tax was built for physical stuff — books, CDs, boxes of software. Then buying moved from ownership to access: nobody buys a movie anymore, they subscribe; nobody installs software, they log in. State legislatures have spent the last ten years modernizing their tax bases to catch up, and two 2026 laws are the biggest moves yet.
Utah’s SB 162 — effective July 1, 2026
Utah’s Online Sales Tax Amendments (Senate Bill 162, sponsored by Sen. Chris Wilson, signed March 23, 2026) did something a lot of states will copy. It expanded Utah’s sales and use tax base to cover amounts paid or charged for access to digital audio-visual works, digital audio works, digital books, and gaming services — including streaming or subscription access — regardless of the delivery method and regardless of whether access is single-use or a subscription.
The software part is what matters most for founders. The law taxes prewritten computer software delivered electronically or by “load and leave,” and — this is the new piece — seller-hosted prewritten computer software, defined as software “accessed through the internet or a seller-hosted server, regardless of whether the access is permanent” or any downloading occurs. That’s SaaS, written into the statute in plain language.
One carve-out: transactions already taxed under Utah’s Multi-Channel Video or Audio Service Tax Act are excluded, so you don’t get double-taxed on the same transaction.
The practical effect: a Utah-based subscription business, or an out-of-state seller with Utah nexus, that sells SaaS, streaming access, or digital subscriptions now has to collect — where before, streaming-only access models with no download were the gray area. Per PwC’s analysis of the law, the change specifically captures streaming-only access models where no product is ever transferred to the buyer. If your business model is “they log in, they never download anything,” Utah just closed the loophole you’re standing in.
California’s SB 122 — operative January 1, 2027
California has been the biggest holdout: digital products and SaaS have historically been exempt. That changes on January 1, 2027, when SB 122 (Chapter 23 of 2026, approved June 29, 2026) brings “digital products” into the sales and use tax base. The law covers prewritten computer software transferred on tangible storage media, transferred electronically, or accessed remotely.
New Revenue and Taxation Code § 6016.2 defines “accessed remotely” as access for consideration — by digital code, password, or other means — to prewritten software residing on the vendor’s server or a third party’s server. And sourcing follows the purchaser’s known address, meaning you tax based on where the buyer is.
California is the largest state economy in the country. When it starts taxing remotely accessed software, every SaaS founder selling into California gets a new compliance obligation on January 1, 2027. If you have California customers, the time to figure out your registration is now — not in January.
The direction of travel
Utah and California aren’t outliers. In 2026 alone, Colorado and Washington expanded the types of software taxed under their sales and use taxes, Kentucky now taxes SaaS outright (including AI-powered tools delivered the same way), Maine extended its 5.5% tax to streaming and digital media (effective January 2026), and Maryland moved digital products and SaaS into the tax base (6% for consumers, 3% for business buyers, after repealing its custom software exemption in 2025). Oklahoma even approved an interim study on taxing SaaS this year. The ownership-to-access shift is the whole story: states tax what people buy, and people buy access now.
The 50-state patchwork: where things stand
Here’s the uncomfortable part: “digital products” isn’t one thing in state tax law. A state can tax downloads, SaaS, and streaming three different ways. The table below is a representative snapshot for 2026, built from state-by-state guidance — use it as your starting map, then confirm your specific product with the state.
| State | Downloads | SaaS | Streaming | Notes |
|---|---|---|---|---|
| Texas | Taxed | Taxed — 80% of charge | Taxed | SaaS taxed as data processing under the 80/20 rule; $500K economic nexus threshold |
| California | Taxed | Taxable Jan 1, 2027 | Exempt | SB 122 operative Jan 1, 2027; previously exempt |
| Florida | Exempt | Exempt | Separate communications tax may apply | Digital goods aren’t tangible property |
| Illinois | Exempt statewide | Exempt statewide | Exempt statewide | Chicago has a local lease tax; withdrew the 200-transaction nexus test Jan 1, 2026 |
| Maryland | Taxed at 6% | Taxed (3% B2B / 6% B2C) | Taxed at 6% | Custom software exemption repealed July 1, 2025 |
| Kentucky | Taxed | Taxed | Taxed | Includes AI tools; withdrew 200-transaction nexus test Aug 1, 2026 |
| Louisiana | Taxed since 2025 | Taxed since 2025 | Taxed since 2025 | Broad 2025 expansion |
| Utah | Taxed | Taxed (from July 2026 clarification) | Taxed from July 2026 | SB 162: streaming, subscriptions, seller-hosted software |
| Virginia | Exempt | Exempt | Exempt | One of the remaining holdouts |
| New Mexico | Taxed (gross receipts) | Taxed (gross receipts) | Taxed (gross receipts) | New Mexico uses a gross receipts tax, not a sales tax |
| Maine | Taxed from 2026 | Not separately addressed | Taxed from 2026 (5.5%) | LD 210, effective January 2026 |
| Washington | Taxed | Taxed | Taxed | Expanded software base in 2026 |
Three things to pull out of this table:
- Your product category matters as much as your state. An ebook download, a SaaS subscription, and a streaming service are three different tax answers in most states.
- B2B isn’t automatically safe. Maryland taxes B2B SaaS at 3%, and many states tax B2B sales unless the buyer hands you a valid resale or exemption certificate. “It’s a business customer” is not a tax strategy.
- Bundles can poison the whole package. If you bundle consulting or onboarding with your SaaS, some states tax the entire bundle. Others let you separately state the exempt professional services. How you invoice can change your tax bill.
The three questions that decide your bill
Forget the table for a minute. Every digital seller’s obligation comes down to three questions, in order:
1. Do I have nexus in this state?
Nexus is the connection that gives a state the right to make you collect. Two kinds:
- Physical presence: an office, an employee, inventory — and in many states, a single remote employee or a contractor doing more than solicitation counts. Showing up at a trade show can do it.
- Economic nexus: since the 2018 Wayfair decision, selling enough into a state creates nexus with no physical presence at all. The standard is $100,000 in sales into the state over the lookback period (usually the current or prior calendar year). Some states differ — Texas uses $500,000, and several states have dropped their old 200-transaction tests (Illinois in January 2026, Kentucky in August 2026), simplifying to dollar thresholds.
And no, forming your company in Delaware doesn’t protect you. A Delaware LLC selling SaaS to customers in Georgia owes Georgia sales tax once it crosses Georgia’s threshold — the company’s home state is nearly irrelevant.
2. Is my product taxable in that state?
This is where the table above comes in — and where most founders get surprised. Crossing a nexus threshold creates a registration obligation, but you only collect on products the state actually taxes. SaaS that’s fully exempt in Florida is fully taxable in Texas at 80% of the charge. Same product, same revenue, completely different outcome.
3. Who is the seller of record?
This is the question that saves a lot of small sellers real money. If you sell through a marketplace or platform — the Apple App Store, Google Play, Etsy, Amazon — marketplace facilitator laws put the collection duty on the platform for those sales. You don’t collect; they do.
But — and this is the part people miss — sales from your own website are yours. The same product sold two ways has two different compliance answers: platform sales are handled, direct sales are on you. Most SaaS and course sellers drive their highest-margin sales through their own checkout, which is exactly where the obligation sits. Starting an LLC doesn’t change this; the selling channel does.
Worked example: a $29/month SaaS founder
Let’s make this concrete. Maya runs a solo SaaS from her home in Delaware — a $29/month scheduling tool, all sales through her own website (Stripe checkout, no app store). Her numbers:
- Total: $180,000 ARR from ~520 customers in 30 states
- Georgia: $120,000 (her biggest market)
- Texas: $60,000
- California: $45,000
- Florida: $40,000
- Everywhere else: under $15,000 per state
Here’s the analysis, state by state:
Georgia — register and collect. SaaS is taxable in Georgia, and $120,000 exceeds the $100,000 economic nexus threshold. Maya must register with Georgia, collect sales tax on her Georgia subscriptions, and file returns. At Georgia’s combined rates, this is her biggest compliance obligation.
Texas — watch, don’t act yet. SaaS is taxable in Texas (at 80% of the charge), but $60,000 is well under Texas’s $500,000 nexus threshold, and she has no physical presence there. No obligation today — but she should track Texas sales monthly, because the day she crosses $500,000 the obligation starts.
California — exempt now, plan for January. SaaS is currently exempt in California, so her $45,000 creates no collection duty. But SB 122 makes remotely accessed software taxable January 1, 2027. If her California revenue is over $100,000 by then — or grows past it in 2027 — she’ll need to register. Smart move: set a calendar reminder for October 2026 to run the California numbers and register in November if needed.
Florida — exempt. $40,000 in sales, SaaS exempt. No obligation regardless of threshold, though she should still track the number in case Florida ever changes the law.
Everywhere else — under thresholds. With under $15,000 per state, she’s below every economic nexus threshold. No registrations needed — but she keeps a spreadsheet, because one enterprise deal can push a state over $100,000 overnight.
Maya’s actual compliance footprint: one state (Georgia) today, with California on the watch list for January 2027. That’s the power of the three-question method — it turns a terrifying 50-state problem into a short list.
The compliance checklist: register, collect, file
Once the analysis says “yes, this state,” here’s the sequence:
1. Get a nexus study before you do anything. A nexus study is just a systematic version of the worked example above: your sales by state, crossed against each state’s threshold and taxability rules. Do it yourself with a spreadsheet or pay a SALT (state and local tax) professional for a few hundred dollars. Either way, do it before you register anywhere.
2. Register before you collect. You generally need a sales tax permit (seller’s permit) in each state where you have an obligation — and you must register before you start collecting, since collecting without a permit is itself a violation in many states. Registration is usually free or cheap and done online through the state’s department of revenue.
3. Collect correctly. This means configuring your checkout (Stripe Tax, TaxJar, Avalara, or your platform’s built-in tax engine) with the right product tax codes per state. Texas’s 80%-of-charge rule for SaaS is exactly the kind of detail that breaks a naive setup — if your tax tool taxes 100% of the charge in Texas, you’re over-collecting, which is its own problem.
4. Get certificates from B2B buyers. If a business customer claims exemption (resale, nonprofit, etc.), get a valid exemption or resale certificate and keep it on file. Without the certificate, the sale is taxable — the buyer’s word isn’t enough.
5. File on schedule. States assign filing frequencies (monthly, quarterly, annual) based on your volume. File even in zero-tax periods if the state requires it — failing to file can trigger delinquency notices even when nothing is owed.
6. If you’re already behind, look at voluntary disclosure — carefully. Most states offer Voluntary Disclosure Agreements (VDAs): you come forward, pay back taxes for a limited lookback period, and penalties are reduced or waived. But the window closes fast: once a state has contacted you about a specific liability, VDA eligibility is usually gone — and registering or filing in a state before applying can forfeit it too. If you suspect you owe back taxes in multiple states, talk to a SALT professional before you register anywhere.
7. Consider a merchant of record. If the whole apparatus sounds like too much, services like Paddle or Lemon Squeezy act as the merchant of record — they become the legal seller, and tax collection, filing, and remittance become their problem, not yours. You pay a higher processing fee (typically around 5% plus per-transaction fees, versus ~3% for Stripe), which is the price of outsourcing compliance. For a solo founder selling globally, that trade is often worth it. Just run the math on your volume first.
The marketplace exception — and why your own site is the risk
One more time, because this is the most expensive misunderstanding in digital sales: marketplace facilitator laws cover your platform sales, not your direct sales.
Sell your ebook on Amazon? Amazon collects. Sell the same ebook from your own Shopify store? You collect. Sell your app through the App Store? Apple collects. Sell subscriptions through your own Stripe checkout on your own domain? You collect.
The pattern is consistent across every state with a facilitator law: the platform is the seller of record for platform transactions. Everything else is yours. And because direct sales are usually your best-margin sales — no platform cut — the obligation lands exactly where the money is.
If you’re a creator selling digital products across channels, map it channel by channel: which sales does a platform handle, and which ones are yours? The answer is rarely “none of them,” and the states with the newest laws (Utah, soon California) are the ones most likely to audit digital sellers who assumed someone else was handling it.
For founders still setting up the business side, the compliance picture starts with getting the entity right — see our guides on forming an LLC online and the BOI reporting rules and exemptions for 2026.
Frequently Asked Questions
Do I need to collect sales tax on SaaS if all my customers are in different states?
Only in states where you have nexus and SaaS is taxable. Typically that means states where your sales exceed $100,000 (thresholds vary — Texas is $500,000). Having customers in a state alone doesn’t create an obligation; crossing the economic nexus threshold does. Run the three-question test: nexus, taxability, seller of record.
I’m a solo founder with $40,000 in total revenue. Do I owe sales tax anywhere?
Probably not yet — but check physical nexus too. If all $40,000 is spread thinly across states and you have no employees or office outside your home state, you’re likely below every economic threshold. The exception: if a single state holds most of that $40,000 and you have a remote employee or other physical presence there, physical nexus can trigger an obligation at any revenue level.
Does selling through the App Store or Etsy mean I’m covered?
For those platform sales, yes — marketplace facilitator laws make the platform the seller of record. But any sales through your own website, your own checkout, or direct invoicing are your own obligation. Most digital businesses have both channels, so map them separately.
What happens on January 1, 2027 in California?
SB 122 brings “digital products” — including prewritten software accessed remotely (SaaS) — into California’s sales and use tax base. If you have California nexus (typically $100,000+ in California sales) and sell taxable digital products or SaaS, you’ll need to register and collect starting that date. Sourcing follows the purchaser’s known address.
I just realized I should have been collecting in a state for two years. What now?
Don’t panic, but don’t register blindly either. Look into a Voluntary Disclosure Agreement (VDA) for that state — it typically limits the lookback period and reduces penalties. Key rule: don’t register or file in the state before applying for the VDA, and don’t wait until the state contacts you, because contact usually kills VDA eligibility. Talk to a state tax professional first; this is exactly the situation they’re for.