Do you have to pay taxes on website hosting services in Texas? The answer is yes. According to the Texas Comptroller's Office, 80% of the charge for web hosting services is subject to taxes such as data processing. This includes Software as a Service (SaaS) and cloud computing services. The Texas Comptroller's Office has ruled that access to software hosted on a remote server is provided via the Internet.
Where a customer can enter, retrieve and manage data is a taxable data processing service. Effectively, 80% of a company's SaaS revenue stream is subject to sales tax and must be collected from consumers. The Texas Comptroller of Public Accounts issued a private letter establishing the taxation on the sales and use of cloud-based website hosting services sold to customers inside and outside the state. The Texas Comptroller's Office issued a private letter in response to an inquiry from a Texas corporation that provides website hosting services.
In the judgment, the corporation's cloud-based website hosting services were considered taxable as data processing services that are subject to taxes on 80% of the sales price. So, if you are providing website hosting services in Texas, you must collect taxes from your customers. It is important to understand the rules and regulations of your state when it comes to taxation on web hosting services.
