SaaS Nexus

Is SaaS Taxable in New York? 2025 Guide

Already Got a NY Tax Notice?

Don't panic—and don't respond yet. Here's what to do:

  1. 1.Don't respond immediately. You typically have 30-60 days. Use that time to understand your position.
  2. 2.Check the AND threshold. NY requires BOTH $500K AND 100 transactions. High-value B2B SaaS often doesn't meet the transaction count.
  3. 3.Review your customer exemptions. Do you have Form ST-120 certificates on file? B2B resale exemptions can reduce your exposure.
  4. 4.Calculate your actual exposure. NY's initial assessment is often negotiable, especially penalties and interest.

VDA Option: If you haven't received a notice yet but know you're behind, New York offers a Voluntary Disclosure Agreement (VDA) program that can waive penalties.

Read our full audit response guide

Yes, New York taxes SaaS. New York treats SaaS as a license of "prewritten software" and taxes it at 4% (state rate) plus local taxes. In NYC, the combined rate reaches 8.875%.

Quick Reference

SaaS Status:Taxable
State Rate:4%
NYC Combined Rate:8.875%
Economic Nexus:$500,000 AND 100 transactions
Threshold Logic:Must meet BOTH
B2B Exemption:Certificate Required

The AND Threshold

Important: New York is one of the few states with an AND threshold. You must have both $500,000 in sales AND 100+ transactions in the preceding four quarters to trigger economic nexus. If you have high-value sales to just a few customers, you may not meet the transaction count.

Why New York Taxes SaaS

Since 2008, New York has taken the position that "prewritten software" is taxable regardless of how it's delivered. Whether you download it, access it via the cloud, or receive it on a disk—New York considers it a taxable license of prewritten software.

Advisory opinion TSB-A-09(44)S confirmed that accessing software remotely (SaaS) is the same as licensing prewritten software and is therefore taxable.

What Triggers New York Nexus?

Economic Nexus (Both Required)

  • $500,000+ in New York sales in the preceding four quarters, AND
  • 100+ transactions with New York customers in the same period

Physical Presence

  • Employees: Any employee in NY creates nexus
  • Contractors: Sales solicitation creates nexus
  • Affiliate nexus: NY has "Amazon laws" for affiliate relationships

B2B Exemptions

New York offers resale exemptions for B2B sales, but you must collect a valid exemption certificate (Form ST-120) from your customer. Without a certificate on file, you must collect tax.

What's Taxable vs Exempt

Taxable

  • Prewritten software (any delivery method)
  • SaaS subscriptions
  • Cloud-based software access
  • Software updates and upgrades

Exempt

  • Custom software designed for a specific customer
  • Software development services (not licensing)
  • Separately stated training services
  • Maintenance without software updates

Check If You Have New York Nexus

Answer 5 questions about your business to see if you meet the AND threshold.

Start Free Analysis

How to Register

  • Authority: New York State Department of Taxation and Finance
  • Timeline: 2-3 weeks
  • Filing: Quarterly filing required. Monthly filing if tax collected exceeds $300,000/year. Annual filing if under $3,000/year.
Register at NY Tax Department

Sources

  • Statute: NY Tax Law §1101(b)(6), §1105(a)
  • Official Guidance: NY Tax Bulletin TB-ST-128
  • TSB-A-09(44)S (SaaS taxability advisory opinion)
  • TSB-M-08(4)S (Prewritten software guidance)
  • TB-ST-128 (Computer Software)
  • Last Verified: 2025-12-21

Other State Guides

Texas (Taxable)California (Exempt)Washington (B&O Tax)Florida (Exempt)Pennsylvania (Taxable)Illinois (Conditional)