Articles Posted in Rhode Island

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(This article originally was published by Law360 on May 17, 2019.)

In the last year, several state legislatures have enacted laws and several state courts have published decisions on whether software as a service, or SaaS, is subject to sales and use tax. These developments impact many SaaS providers, especially due to the expanded nexus provisions that many states are enacting after the United States Supreme Court’s South Dakota v. Wayfair Inc. decision.1 The states have gone in different directions—Indiana enacted legislation exempting SaaS, while Iowa and Rhode Island began taxing SaaS. The Massachusetts Appellate Tax Board and the Pennsylvania Board of Finance and Revenue have both issued decisions clarifying the taxability of SaaS offerings.

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(This article originally was published by Law360 on October 10, 2017.)

States historically have had one major impediment to their ability to collect sales tax—the decision in Quill Corporation v. North Dakota to uphold a physical presence test standard for determining nexus.[1] Since the Quill decision, states have applied various approaches to limit or even eliminate Quill’s physical presence nexus standard. These approaches included lobbying Congress to provide federal legislation that would redefine nexus, enacting state “click-through” nexus statutes, and taking aggressive audit positions that limit the applicability of physical presence nexus.

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With the significant rise of third-party enforcement actions—especially consumer class actions and qui tam actions involving state tax questions—corporate taxpayers are being forced to assess a significant set of risks in connection with their compliance obligations.

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