Iowa Makes SaaS Taxability Determination
- Sales Tax News
- Feb 16, 2012 | Susan McLain
In Iowa, the question of the taxability of hosted software came up in a recent letter request for ruling. According to Iowa Code section 423.3(67), Software-as-a-Service products are considered exempt if it falls into the following description: “…the transaction is delivered to the purchaser digitally, electronically, or utilizing cable, or by radio waves, microwaves, satellites, or fiber optics.”
Per the letter ruling, shown on TaxAnalysts.com, “…the hosted software the Taxpayer provides is not delivered in hard copy to the subscriber; instead, the software is only available for use electronically. Therefore, according to Iowa Code section 423.3(67), a taxable sale of property does not occur.”
In addition, according to Iowa Code, “…only enumerated services are subject to tax,” and software training is not enumerated. “Therefore, regardless of whether the training is delivered in person or via the Internet, the training is not subject to sales tax.”
NOTE: Letters rulings are specific to a question posed by a unique business. Always consult your tax professional or the state where you have a question in order to determine the exact rule/law of the state regarding taxability.