# US Sales Tax on Digital Products and SaaS (2026): When You Owe It

> Sellers abroad can owe US sales tax once they pass a state’s sales threshold. Each state decides whether software and SaaS are taxed. California taxes SaaS from 2027.

Source: https://agentaos.ai/answers/us-sales-tax-digital-products (canonical HTML page). Publisher: AgentaOS (Aristokrates OÜ, Estonia).

## Do I have to charge US sales tax on digital products?

“I sell a SaaS from outside the US and half my buyers are American. Do I owe sales tax there?”

**Possibly, state by state.** Since 2018 a US state can require a seller with no presence there to collect its sales tax once the seller passes the state’s threshold of sales into it. Each state also decides whether software, downloads and SaaS are taxable at all, and California taxes SaaS from 1 January 2027. With a Merchant of Record, it is the seller and collects the tax, not you.

## Why can a state tax a seller outside it?

> “the physical presence rule of Quill is unsound and incorrect”
>
> Source: [U.S. Supreme Court, South Dakota v. Wayfair (2018)](https://www.law.cornell.edu/supremecourt/text/17-494)

Before 2018 a state could only make a seller collect its sales tax if the seller had a physical presence there. The Wayfair decision ended that rule. The South Dakota law it upheld applied to sellers with more than $100,000 of sales into the state, or 200 or more separate sales, in a year. Each state now sets its own threshold and its own list of what is taxable.

## Are digital products and SaaS taxed?

It depends on the state, and the answer can differ for a download, an online course and a SaaS subscription. Some states tax all three, some tax none, and some tax only part of the price.
The rules also change. California, which did not tax SaaS or downloaded software, will tax digital prewritten software, including SaaS, from 1 January 2027 under SB 122. Custom software stays exempt. [BDO summary of SB 122](https://www.bdo.com/insights/tax/california-moves-to-subject-digital-prewritten-software-to-sales-and-use-tax).

## What does collecting it yourself involve?

- **Track your sales into each state** and watch for its threshold.

- **Check, per state, whether your product is taxable**, and at what share of the price.

- **Register in each state** where you pass the threshold, before you collect.

- **Charge the right rate at checkout**, which can vary by city or county.

- **File a return in every state** where you are registered, even for months with no sales there.

## Where does AgentaOS fit?

AgentaOS is the Merchant of Record: it is the seller to your buyer, so it registers, charges and files US sales tax where it is due, as it does for EU VAT. You never register in a state. [How tax works](https://docs.agentaos.ai/mor/tax).
Selling to the EU too? See [EU VAT on digital sales from outside the EU](https://agentaos.ai/answers/eu-vat-selling-from-outside-the-eu).

## Common questions

**Do I owe US sales tax if I live outside the US?** You can. A state can require any seller that passes its sales threshold into that state to collect its sales tax, wherever the seller is based.

**Is SaaS taxable in California?** From 1 January 2027, yes: SB 122 makes digital prewritten software, including SaaS, taxable in California. Custom software stays exempt.

**Does a Merchant of Record handle US sales tax?** Yes. As the legal seller, the Merchant of Record collects and files sales tax where it is due, so you do not register in each state.

## Sources

- [U.S. Supreme Court: South Dakota v. Wayfair (2018)](https://www.law.cornell.edu/supremecourt/text/17-494)
- [BDO: California SB 122, sales tax on digital software and SaaS](https://www.bdo.com/insights/tax/california-moves-to-subject-digital-prewritten-software-to-sales-and-use-tax)
- [AgentaOS tax](https://docs.agentaos.ai/mor/tax)