In a few weeks, Infusionsoft will begin charging sales tax for products and services for customers in 14 states across the United States. Understandably, this has created questions, concerns and frustration from affected customers. We understand.
Here is an overview of why we are collecting this new tax.
Historically, states have treated “Software as a Service” (SaaS) solutions like Infusionsoft as a service product, meaning no sales tax needed to be collected. Recently, some states have begun treating SaaS solutions as a product and now require vendors like Infusionsoft to collect sales tax.
Effective November 1, Infusionsoft will begin collecting and remitting sales tax for the 14 states that have clarified and simplified their tax policy regarding SaaS. These states include:
- New Mexico
- New York
- Rhode Island
- South Carolina
- South Dakota
- Washington, DC
We expect the list to grow as additional states roll out their SaaS product tax policies.
The tax rate will fall somewhere between 8% and 10%, depending upon local tax rates. Most affected customers will be taxed $16 to $50 per month, with an average tax of $30 per month.
Many of you may not like this change. We understand.
Our purpose is to help small businesses succeed. We work hard every day to deliver exceptional value for customers like you. This new tax has effectively raised the cost of Infusionsoft without directly increasing the value you get in return. It’s frustrating and we totally understand.
Unfortunately, state tax laws are outside of our control. It may be helpful to know that 100% of the taxes are paid to your state government, which then invests a significant portion of those funds in programs that build strong communities and support small businesses.
If you have any additional questions about the tax, I encourage you to share your feedback with your state’s legislators.
This news can be at least a little unsettling for some of you. Here are a few FAQs that you might have about this new SaaS tax:
Do I have to do anything else besides pay these taxes?
Generally, no. Infusionsoft will collect taxes and remit them to your state in accordance with all necessary tax laws and regulations. If you have questions about your individual tax liabilities, please consult with a Certified Public Accountant (CPA) or other tax professional.
Why is Infusionsoft charging me this tax now?
Tax laws and legislation change regularly and a number of states have recently mandated that SaaS providers collect and remit taxes for their services.
What if I do not reside or have my business incorporated in these states?
You do not need to pay these taxes—yet. If your state does not assess taxes on SaaS or cloud-based software vendors, there will be no taxes assessed on your Infusionsoft account. In the future, your state may require that SaaS vendors collect and remit taxes, and we will need to comply.
Is this a tax because Infusionsoft itself is based in Arizona?
Not exactly. While Arizona is also one of the states that collects this tax, if your state requires a tax to be collected, this decision rests with your state’s legislators.
I pay for other SaaS services and they have not taxed me. Why Infusionsoft?
This is pretty new for us, too. Many other SaaS vendors may already be adding this charge to your invoices. Also, many of these SaaS-tax laws have only been recently enacted. If we collect this tax from you, expect that other cloud-based services may follow suit.
I don’t like this new tax. Who should I talk to?
We know this is an unpopular bit of news to read. We have a regulatory obligation to remit these taxes on behalf of our customers. I recommend that you share your comments with your state’s legislators.
For your individual tax liability and accounting questions, please seek a Certified Public Accountant or other tax professional to best address your needs. If you have general questions or concerns about this change, feel welcome to let us know in the comments below.
Photo Credit: Dave Dugdale
Read more about this post, Infusionsoft to Collect & Remit SaaS Taxes on The Infusionsoft Blog.