Is SaaS taxable in Kentucky?

by Sarah Craig March 2, 2023

When your company sells a software as a service (SaaS) product, it can be tricky to determine where and from which customers you are required to collect sales tax. Some states consider SaaS to be a non-taxable service, some consider it a taxable product, and some state taxing authority opinions fall in between.

This post will go over what you need to know about SaaS taxability if you are selling these types of products to customers in Kentucky.

SaaS taxability in Kentucky

As of January 1, 2023, Kentucky’s list of taxable services was expanded to include SaaS offerings. Specifically, the new legislation categorizes SaaS as prewritten computer software services. The state of Kentucky defines prewritten computer software services where the point of the transaction is for the buyer to access the prewritten software while the possession of the software is maintained by the seller, regardless of how the charge for access is distributed.

How can I learn more about SaaS taxability in Kentucky?

You can read more about SaaS taxability in Kentucky House Bill 8. In addition, you can find information in the June 2022 Ketucky sales tax newsletter.

How to automate sales tax when selling a SaaS product

With TaxJar’s Sales Tax API, all you need to do is let us know that you are selling a SaaS product by entering the product tax code that corresponds to your particular product. From there, we ensure that you collect the right amount of sales tax from every customer in every state where you are required to collect sales tax. If SaaS is non-taxable in a state, then your customer will not be charged.

Not only does TaxJar make sure you collect the right amount of sales tax, we automatically help you stay compliant in states where your business has economic sales tax nexus. On your behalf, we’ll track when your revenue or your number of transactions in a state exceeds that state’s threshold for economic nexus. No more guessing or digging into your books and each state’s individual nexus laws to determine when it’s time to start collecting sales tax.

Get started with TaxJar today for free with our 30-day TaxJar trial.