US Sales Tax on Software and SaaS Sold from Canada

Do I charge US sales tax on SaaS sold from Canada?

The US has no federal sales tax (State Department). Charge state or local tax only where the sale is taxable and your corporation has a collection duty. Check the customer's state, product, and registration test. See foreign sellers and US sales tax for the Canadian-status and treaty question.

Rules checked September 29, 2026. California has published a change making digital products generally taxable beginning January 1, 2027, including remote access. The table is selective.

After a new threshold crossing, Texas starts collection no later than the first day of the fourth month after the threshold-crossing month (Comptroller); New York requires registration within 30 days after the tests are met and collection 20 days after the registration deadline (Tax Law; registration); Washington starts on the first day of the month starting at least 30 days after crossing (DOR). See when you must collect sales tax for other states and presence rules.

Do SaaS sales count toward a state's sales threshold?

SaaS sales may count even when an invoice is exempt. Texas counts taxable and nontaxable Texas property and service revenue, including resale, exempt-customer and marketplace sales (Texas Comptroller).

In New York, remote prewritten software counts as tangible property; a reports-focused subscription may instead be an information service (bulletin; opinion). Count invoices, contracts and exempt sales, not seats (Tax Department). Washington counts exempt and marketplace receipts (DOR); California's remote test uses tangible-property sales (CDTFA).

Which state gets the tax when users work in several states?

Use where the customer receives or uses the software, as each state defines it; the Canadian server or billing address alone may mislead. New York sources remote software to where the purchaser uses or directs its use and taxes only the receipt attributable to New York users (New York Tax Department).

Washington sources remote software where the buyer receives it, then follows its address hierarchy if unknown; do not estimate a user split. Custom software can be allocated to known receipt locations by a reasonable method agreed with the buyer by invoice date (DOR; custom guidance). A qualifying buyer can give a multiple-points-of-use certificate and apportion Washington use tax. A Texas buyer using data processing at business locations in several states can give a multistate-use certificate and report its Texas share (Texas rule). Ask for locations and keep certificates.

Can a business customer give an exemption certificate or pay tax on only part?

A business purchase is not automatically exempt. A New York buyer claiming qualifying production or research use gives the seller signed Form ST-121; ordinary business use of prewritten software is taxable (New York Tax Department).

Texas's multistate-use certificate requires use at the buyer's business locations in multiple states (Texas rule). Washington's buyer signs Form 27-0050 for concurrent use inside and outside the state; its business-purpose exemption covers digital goods, not remote software or digital automated services. Keep the certificate before removing tax.

Are custom software, support and bundled services taxed differently?

Yes. New York generally exempts software developed for one purchaser and reasonable, separately stated custom modifications. Training, troubleshooting and maintenance sold with taxable prewritten software need reasonable separate charges to remain exempt; a mixed maintenance agreement with taxable upgrades needs separate contract and invoice charges (New York Tax Department).

Washington taxes custom software and customization, including remote access, and lists help desk and network support among newly taxable services. Litigation continues; affected sellers must collect under current guidance (Washington DOR; new services). Its multistate-use relief may cover licensed custom software, but a nonitemized bundle can defeat it (interim guidance). Texas separately treats a distinct, reasonable, separately billed nontaxable service; a bundle can make more taxable (Comptroller).

What if an app marketplace sells the software for us?

Confirm whether the marketplace is legally collecting tax on each state sale, and keep its written certification or other proof. Texas says a seller using only a certified collecting marketplace does not need a Texas permit under that arrangement, while marketplace revenue still counts toward the seller's threshold for any direct sales (Texas Comptroller).

Washington may still require seller registration and business-and-occupation tax reporting when its receipts test is met, even if the marketplace collects retail sales tax. New York likewise says a marketplace seller that independently meets registration requirements must register and file returns (Washington DOR; New York Tax Department). Identify who invoices the buyer and which sales are direct before assuming the marketplace handles everything.

What should we set up before the first taxable invoice?

Set up collection in each state where your corporation has a duty, before charging tax. Work from a short record for each product and state:

1. Describe what the customer gets: prewritten access, a download, custom work, support, or a bundle. Keep the contract and sample invoice.
2. Total state receipts and transactions for the state's lookback period, including the marketplace and exempt sales that state counts.
3. Record buyer and user locations, a defensible allocation method, and any valid exemption or resale certificates.
4. Register, configure tax, and test an invoice. Texas remote sellers may elect one local use-tax rate on their permit application; an existing seller's officer or agent submits Form 01-799, effective at a reporting period's start. Undercollected tax, interest and penalties can fall on the seller (Comptroller).

People handling collected tax may also be liable: Texas can assess a person who controls payment and willfully fails to remit it (Tax Code §111.016); New York can assess duty-bound officers (Tax Law §1131). In Washington, after a tax warrant and insolvency or closure, a president or treasurer can owe tax accrued during that role (RCW 82.32.145).

After registration, filing sales tax returns covers the continuing reports and payments.

Example

Toronto SaaS seller with Texas subscriptions

Illustrative US dollars: A Toronto corporation sells US$600,000 of Texas SaaS subscriptions in the preceding 12 calendar months, directly and without other Texas presence. It crosses the Texas safe harbor and registers. If its SaaS is data processing, US$800 of a US$1,000 invoice is the taxable base for state and local tax.

New York users and California downloads

Illustrative US dollars: The corporation has US$600,000 of remote-software receipts attributable to New York users on 120 invoices in the previous four sales tax quarters. It crosses both tests and collects on that share. Its California customers buy only electronic downloads, without a physical copy; those sales are generally untaxed there through 2026. It checks California's 2027 rule before later invoices.

Sales only through an app marketplace

The corporation sells only through a marketplace that certifies Texas tax collection. It retains the certification and uses the Texas marketplace-only permit rule. It checks New York registration and Washington reporting separately.

Different for you?

• You are unsure whether Canadian status or the treaty changes collection: see foreign sellers and US sales tax.
• You need to test other states or types of presence: see when you must collect sales tax.
• You already have permits or missed earlier sales: see filing sales tax returns or catching up on uncollected sales tax.
• You also need the Canadian tax treatment: see charging GST/HST to US customers.
• Your Canadian corporation may have US income-tax filings, or a state sent an income-tax letter: see Canadian corporation US tax returns or business income tax in other states.
• Several states, mixed products or multistate users make the allocation material: gather contracts, invoices, state sales, user locations and marketplace reports for cross-border tax help.