Australian founders tend to arrive in the US expecting something like GST: one rate, one registration, charge it on everything and claim back what you pay. US sales tax breaks all three of those assumptions, and for a SaaS business the first question isn’t “what rate do I charge” – it’s “is my product even taxable here at all.”
In this article, we walk through how US sales tax differs from GST, why SaaS taxability varies wildly by state, what nexus means and how you trip into it, and what to do as you grow.
How US sales tax differs from GST
Start with the contrast. At home, GST is one federal tax, a flat 10%, with a single ATO registration. It applies broadly, including to SaaS, and because it’s a value-added tax you claim input credits on what you spend.
The US has no federal sales tax. Instead there are 45 states plus the District of Columbia that levy one, sitting on top of more than 12,000 local jurisdictions, each with its own rate, its own rules and its own view on what’s taxable, and there are no input credits because it’s a single-stage tax collected only at the final sale.
Is SaaS even taxable?
Only in around 22 states plus DC. In the rest it’s exempt or simply not taxed. The same product can be taxable in Washington and exempt in California.
The local detail gets stranger. Texas taxes SaaS as a “data processing service” but exempts 20% of the charge, so 80% is taxable, which works out to an effective rate of about 6.6% at the full 8.25% combined rate. Chicago layers its own lease transaction tax on SaaS even though Illinois exempts it at state level, and that local rate has climbed fast, from 9% to 11% in 2025 and to 15% from 1 January 2026. Some states tax downloaded software but not cloud-accessed software, and some tax business use differently from consumer use.
Where nexus comes in
Even where SaaS is taxable, you only collect where you have nexus. Nexus is your taxable connection to a state. It can be physical, created by an employee, an office or inventory, or economic, commonly triggered by around US$100,000 of sales into a state, a standard that came in after the 2018 Wayfair decision.
The risk is that founders trip into these obligations without realising, and the cost of getting it wrong is real. Penalties can reach around 30% plus interest, and you can be held liable for tax you should have collected but didn’t.
What you should do as you grow
Monitor where you have nexus and check SaaS taxability state by state, rather than assuming a single answer. Automation tools and good advice make this manageable. And if you sell through a marketplace, the marketplace usually collects on those particular sales for you, though your direct sales still count.
Get your US sales tax exposure mapped out
US sales tax for SaaS is genuinely fragmented, and the answer is different for every state you sell into. If you’re scaling US sales and want to understand where you actually owe tax, the team at Standard Ledger can help. Book a free call with the team.
Disclaimer: This article is for general informational purposes only and does not constitute financial, legal or tax advice. Please speak with a qualified adviser (hey, that’s us!) before making decisions based on your specific circumstances.
