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Sales Tax Triggers for Software Companies on the Rise

by | Jan 8, 2018

Sales Tax Triggers for Software Companies

Growing is the end goal of any software company, but that does not mean success is seamless or simple. Companies must be aware of the sales tax triggers their growth is propelling them towards in order to avoid the kinds of obstacles and oversights that can slow down momentum.

If your software company is on the rise, watch out for these three tax obligations that could be looming over you:

Taxes on Your Remote Workforce

Advances in technology make it relatively easy and advantageous to rely on a remote workforce. The only problem is that relying on workers in another state may obligate you to pay sales tax in that state depending on the software taxability rules that apply.

If you are unaware of this requirement, you could face an expensive audit at some point down the road. And even if you are aware, your tax team will have to take on lots of extra work. Taking advantage of top talent no matter where they may be located is too big an asset to ignore. Just don’t let your staffing efforts put your tax bill in jeopardy.

Taxes on Your New Products

Every state taxes individual categories of software differently. If you plan to launch a new product in the near future you are counting on it to propel your growth. But if you are unaware of how your tax bill will change once the software hits the market, your launch could stumble.

Early planning is essential. Your tax team must be aware of when, where, and how a new product is about to launch. And they must have tools that help them manage new tax obligations without becoming overwhelmed by the added workload.

Taxes on Your Cloud Presence

Even though the cloud is technically “everywhere”, the location of the servers that run your cloud is important. Depending on the state and the nature of the storage you may be obligated to pay taxes in that state regardless of whether you own the servers or pay a third-party for access.

These same issues apply to SaaS. You may have to pay taxes to the state you access SaaS products from. And if you sell these products, you may have to charge sales tax depending on where your customers are located.

A bigger tax bill is a fact of life for any growing software company. But the cost is less of an issue than the complexity. Companies struggle less with paying the bill and more with knowing exactly how much to pay and exactly who to pay.

Sage Intacct is an industry-leading financial management software designed specifically to streamline your workflows and scale your accounting efforts. If you want to continue your upward trajectory uninterrupted, contact InCloud360 to learn more about this sweeping solution.

To understand your company’s sales tax obligations in more detail, download Part 1 of The Software Executive’s Guide to Sales Tax.