States that tax web hosting services In Texas, 80% of the charge for web hosting services is subject to taxes such as data processing. In Texas, SaaS (software as a service) and cloud computing are recognized as taxable data processing services. The Texas Comptroller's Office has ruled that access to software hosted on a remote server is provided via the Internet. Where a customer can enter, retrieve and manage data is a taxable data processing service.
Effectively, 80% of a company's SaaS revenue stream is subject to sales tax. It must be collected from consumers, respectively. The Texas Comptroller of Public Accounts issued a private letter establishing the taxation on the sales and use of cloud-based website hosting services sold to customers inside and outside the state. The Texas Comptroller's Office issued a private letter in response to an inquiry from a Texas corporation that provides website hosting services.
In the judgment, the corporation's cloud-based website hosting services were considered taxable as data processing services that are subject to taxes on 80% of the sales price.