G Suite To Begin Charging Sales Tax

state sales tax rates

Google will soon begin charging sales tax for US customers of G Suite. Because G Suite is one of the most popular productivity suites on the web, this will affect millions of businesses.

When Will Google Start Charging Sales Tax?

Sales tax will be added starting November 1, impacting the November billing cycle.

How Much Will The Sales Tax Be?

That depends on your state and local jurisdictions. Each state determines taxability of SaaS. Some states classify it as a service and some as a product. Similarly, some states tax services and some tax products. TaxJar has a detailed map and list of state-by-state SaaS sales tax policies. However, some SaaS companies may charge sales tax even if the state does not require it, perhaps to simplify financial policies and processes.

Can I Avoid Paying Sales Tax?

Yes, you can avoid paying sales tax if you are an exempt organization. You need to contact Google or your G Suite reseller to submit a tax exemption certificate.

What Are The Broader Implications Of Google’s Move?

Google is not the only SaaS vendor. And it’s not the first one to start charging Sales Tax. Microsoft, for example, charges sales tax on Office 365 subscriptions. (Seemingly sometimes even in states that don’t require them to charge sales tax.) With so many SaaS developers, it’s reasonable to expect more and more of them will start charging sales tax.

What Are The Broader Implications Of Google’s Move?

First, take a look at the state-by-state list of SaaS tax policies to see if your state expects the vendor to charge sales tax.
Second, determine if you are an exempt organization, and if so, submit documentation to each SaaS vendor (or their reseller) to make sure you aren’t charged sales tax.
Third, examine each SaaS invoice to see if tax is correctly being applied. If you are in a no-tax jurisdiction, contact your SaaS vendors to get them to waive the sales tax charges.
Fourth, set a reminder in your calendar to revisit this topic in 6 or 12 months.
Finally, recognize that any SaaS pricing you see on the web, or negotiate with vendors, may not be the total cost you’ll have to pay. So, budget and negotiate accordingly.

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Mark Evans