Do I Charge Sales Tax
On B2B SaaS Sales?
"We only sell to businesses, so we don't need to collect sales tax." This is one of the most common—and dangerous—assumptions in SaaS.
The reality: Most states do NOT automatically exempt B2B sales. In most cases, you must collect and remit sales tax even when selling to another business—unless the customer provides a valid exemption certificate.
How B2B Exemptions Actually Work
!The Default: Tax Is Owed
In most states, sales tax applies to all sales of taxable goods/services regardless of who's buying. A business customer doesn't automatically mean no tax.
1Resale Exemption
If your customer is reselling your product (bundled into their own offering), they can provide a resale certificate. This shifts the tax obligation to the end customer.
Example: An agency buys your SaaS to resell as part of their service package.
2Entity-Based Exemption
Some organizations are exempt from sales tax entirely: nonprofits, government agencies, schools. They provide an exemption certificatespecific to their status.
Example: A 501(c)(3) nonprofit provides their exemption letter.
3Use-Based Exemption
Some states exempt purchases used in manufacturing, R&D, or specific industries. The customer provides a certificate showing how they'll use the product.
Example: A manufacturer buying software for production line automation.
You Need a Certificate
In almost every case, exemption requires documentation. Without a valid certificate on file, you are liable for the tax—even if your customer claims to be exempt.
The Audit Risk
During an audit, the state will ask for exemption certificates for every non-taxed sale. If you can't produce a valid certificate, YOU owe the tax plus interest and penalties—not your customer.
B2B Rules by State
For the 10 states we cover, here's how B2B exemptions work for SaaS:
| State | SaaS Taxable? | B2B Exemption | Notes |
|---|---|---|---|
| Texas | Yes | Cert required | Form 01-339; heavily audited |
| California | No | N/A | SaaS not taxable to anyone |
| New York | Yes | Cert required | ST-120 for resale; ST-119 for exempt orgs |
| Florida | No | N/A | SaaS not taxable to anyone |
| Pennsylvania | Yes | Cert required | REV-1220 for resale |
| Illinois | Partial | Varies | State exempt; Chicago taxes apply |
| Washington | B&O | N/A | B&O tax, not sales tax |
| Massachusetts | Yes | Cert required | ST-4 for resale |
| Colorado | Complex | Varies | State exempt; local varies |
| Georgia | No | N/A | SaaS not taxable to anyone |
Common Mistakes
"They said they're a business, so I didn't charge tax"
Without a certificate, you're on the hook.
"I have a certificate from 2019"
Certificates expire. Check your state's renewal requirements.
"They gave me their California resale cert for a Texas sale"
Certificates are state-specific. A CA cert doesn't work in TX.
"I'll get the certificate later"
Collect before the sale. Retroactive certificates are problematic in audits.
Check Which States You Need Certificates For
Our analysis shows which states you have nexus in and whether SaaS is taxable there—so you know where to focus your certificate collection efforts.
Run Nexus Analysis