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Writer's pictureMichael Moore

Payroll Tax Providers and the Implications of Wayfair et al

Updated: Nov 22, 2021

The decision of South Dakota v. Wayfair, Inc. et al, No. 17-494 (June 21, 2018) 585 US has created potential compliance issues for payroll tax providers. The continued enhancements to the services provided by professionals in this area are often managed through various software tools. If and when those software products are utilized by the provider's customer there is the potential for that service to be defined as Software as a Service (SaaS).

The implication? SaaS is considered a taxable service in many states.


In the past the implications of this taxability were less visible to many providers based on a perceived (or actual) lack of nexus with the jurisdictions of many of their customers. That has changed now that economic nexus is here. That definition is now driven by the quantity of transactions and/or dollar amounts involved in sales for each jurisdiction. Although the qualifications are not consistent between the states there is at least some level of potential risk in almost all jurisdictions based on these new interpretations.


The result? We recommend you discuss your sales with your accounting advisor to determine whether your services may be SaaS.



If they are you can start mitigating the implications of that conclusion.

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