The Kansas Department of Revenue issued an opinion letter discussing the sales tax treatment of charges for hosted software services billed to Kansas subscribers. The application service provider (ASP) charges subscribers for the use of software hosted on the ASP’s remote servers, located out-of-state. Subscribers access the software via the internet. This type of transaction is commonly referred to as “Software as a Service” (SaaS) or cloud computing. In this instance, no software was downloaded or delivered to the customer, and title to the software did not pass to the subscribers. In Kansas, charges imposed by an ASP for using software on a remote server are not considered charges for a lease and are not subject to sales tax. The department noted that Kansas law applies sales tax only to services expressly described under Kansas law as subject to sales tax. None of the taxable services enumerated in Kansas law can be construed as hosted software services. The department also stated that charges for hosted software services are not subject to Kansas sales tax as sales of prewritten computer software because the software installed on the server (regardless of whether the server is located in Kansas or out-of-state) is not delivered to subscribers or installed on their computers. Such software is not taxable as a sale of prewritten software as long as the software is not billed to subscribers as a separate line item charge. (Opinion Letter No. O-2012-001, Kansas Department of Revenue, February 6, 2012)