Software as a Service Taxable in Rhode Island, Effective October 1, 2018

Effective October 1, 2018, Software as a Service (SaaS) is subject to Rhode Island 7% sales and use tax. Tax will apply regardless of whether access to or use of the software is permanent or temporary, and regardless of whether it is downloaded. The following are examples of taxable purchases under the new law:

• A subscription to a software program that provides digital tools for office work, such as a spreadsheet program, a program to create overhead presentations, or a program to create written documents
• Software programs that are accessed or used online to handle such functions as payroll, accounting, or human resources
• Software programs that are accessed or used online to manage the books of your business
• Software programs that are accessed or used online to handle customer relationship management (CRM)
• Online dating services that are accessed or used online, including through dating applications on a computer, phone, or other device
• Job-search programs or a social media program that links you to other professionals.

In general, the seller is responsible for collecting and remitting the tax on these sales. If the seller does not charge tax, the consumer is responsible for paying the tax. Under the new law, the purchase of e-books, digital videos, and/or digital music products – whether downloaded or streamed – will continue to be exempt from sales tax. (Advisory 2018-38, Rhode Island Division of Taxation, September 4, 2018)