No. Software as a Service (SaaS) is not taxable in New Hampshire, because New Hampshire has no statewide sales tax. There is no indication that this will change in the near future.
However, even if your business is located in New Hampshire, it’s important to understand that sales tax rules in other jurisdictions could apply to your company under certain circumstances.
Sales tax in New Hampshire
New Hampshire is one of five states with no general statewide sales tax. The state also has no income tax. However, while the majority of goods and services aren't taxed, there are a few exceptions for some meals and rentals, certain communication services, and excise taxes.
Outside of these exceptions, businesses don't need to worry about registering for sales tax, or collecting and remitting sales tax, in New Hampshire.
Not only that, but according to New Hampshire Public Radio, almost everyone running for governor from either party has taken a pledge in New Hampshire not to ever consider a broad-based sales tax or income tax.
Historically, New Hampshire has been proud of its anti-tax stance, so it seems unlikely that tax laws will change any time soon. Businesses selling SaaS or other digital goods or services in New Hampshire don't have to worry about becoming obligated to collect local sales tax any time soon.
Sales tax is still an issue for New Hampshire businesses
If you’re based in New Hampshire and selling SaaS, you probably have customers in other states. If you establish nexus in a state that taxes sales of SaaS, then you may become obligated to collect sales tax in that state.
There are two types of nexus: physical and economic.
Physical nexus is a physical connection to a state, like having a store, warehouse, or employees there. And before 2018, that was the only type of nexus businesses had to think about. But in 2018, the Supreme Court’s ruling in a case called South Dakota v. Wayfair Inc. allowed states to establish economic nexus thresholds.
In most states, this means that if you have a certain number of transactions (such as 200 or more) or a certain volume of sales (such as $100,000 or more) in a year, you have established economic nexus.
Once you establish nexus in a state, you become obligated to register for sales tax there, to collect the required amount from customers in the state (based on state and sometimes local laws), and to remit sales tax on the schedule required by local laws.
What does this mean for SaaS companies?
For any company selling products or services online, economic nexus rules can create headaches as they mean that you must track your sales within each state and take action as soon as you hit the point where you establish nexus.
Things become even more complicated for SaaS companies because the rules for how and whether SaaS is taxed vary by state, and those laws are still evolving, given that this is a relatively new market.
Because of the differing rules, your company must:
- Find out which of the states you do business in tax SaaS. For example, in nearby Vermont and Massachusetts, SaaS sales are subject to tax.
- Determine whether you have physical nexus in those states.
- Track your sales to monitor for when you establish economic nexus.
- Register and follow all state and local sales tax rules.
This can take a lot of time and effort, especially if you are doing business in all 50 states.
A solution for SaaS companies
Managing sales tax compliance on your own can be a time-consuming challenge, but fortunately, there's no need to do that. Just reach out to Numeral. Numeral works with SaaS companies of all sizes, helping them comply with their sales tax obligations across the U.S. and around the world.
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We'll monitor for economic nexus for you, stay up-to-date on the rules for when SaaS is taxable, register in states where it is required, and pay your sales tax for you on schedule. We'll take care of everything related to sales tax, so you can focus on building and maintaining the best software product for your customers.
Reach out to Numeral today to learn more about how we can help.
