The Oklahoma Tax Commission (Commission) recently issued guidance on how sales tax applies to certain Software as a Service (SaaS) subscriptions. The ruling involved a company that provides customers with access to software online. Customers pay a monthly or annual subscription but do not download or own the software. Oklahoma considers prewritten software to be tangible personal property (TPP), however, the state specifically exempts prewritten software when it is delivered electronically. In this case, customers accessed the software through the internet, and nothing was provided on a CD, USB drive, or other physical storage device. Since the software was delivered electronically, the Commission determined that the subscription charges were not subject to Oklahoma sales or use tax. The ruling also addressed additional services that may come with a SaaS subscription. Implementation, account setup, data configuration, and similar services related to the software were also exempt from sales tax. Training and customer support related to the hosted software were also exempt, if taxable TPP was not provided as part of those services.
The Commission also addressed whether the SaaS provider needed an Oklahoma sales tax permit. It states that if the provider is not making taxable sales in Oklahoma, it is not required to obtain a sales tax permit solely because it sells the exempt hosted subscription. This could reduce registration and filing requirements for some SaaS businesses whose only Oklahoma sales are similar to those covered by the ruling. However, even when transactions are exempt, businesses still need adequate records. The Commission stated that the taxpayer should maintain complete books and records for all sales and purchases, not only taxable transactions. Records should clearly separate taxable receipts from nontaxable receipts.
The ruling is fact-specific and may be relied upon only by the taxpayer to whom it was issued. The Commission specifically states that its conclusion depends on the facts being complete and accurate and on there being no change in applicable law. Nonetheless, Oklahoma’s ruling provides useful guidance for SaaS providers that electronically delivered prewritten software and certain related services, can be exempt from Oklahoma sales and use tax. Businesses should still review their specific products, delivery methods, additional services, and any sales of hardware or other taxable items separately.
(Letter Ruling LR-26-012: Request Regarding Oklahoma Sales and Use Tax, Oklahoma Tax Commission, September 8, 2026)