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Texas Expands Tax on SaaS

Texas – Most businesses have websites or apps that can be used on your phone, which usually has options to purchase online, to contact the company to ask questions, or just to send messages.

For the message to get to the service provider, it is uploaded to a cloud-based software. Effective May 30, 2017, these cloud-based texts or messages are now considered taxable data processing services.

Once you submit the information, it is sent thru a web-based application that translates the message, creates reports for taxpayers, and stores the message. These services are considered taxable data processing services and are excluded from general telecommunication services.  In the state of Texas, data-processing is taxed at a tax rate of 80% allowing a 20% exemption.  (ex. 8.25% > 6.6%)

The software used for processing data and any request is called SaaS (Software as a Service).  There will also be sales and use tax charged to businesses for renting specialized printers to print out customer’s messages and for the rental of tangible personal property.



About Davis & Davis LLC – Sales Tax Experts: Headquartered in Dallas, Texas, Davis & Davis LLC – Sales Tax Experts specializes in sales/use tax refund recovery and audit defense. Our team of consultants is comprised of former Big 4 sales tax consultants and state sales tax auditors. Each of our consultants has 15 to 20 years of experience, providing our clients with access to a highly specialized team of sales/use tax professionals. At Davis & Davis, we are committed to maintaining the highest standards in our talent pool. We work hard to meet our clients’ needs by ensuring that you view our firm as an extension of your company and a member of your team.

For sales/use tax compliance questions or audit-related concerns, we are here to help!

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