Is SaaS Taxable in New York? Prewritten Software Rules, Nexus Thresholds, and Rates

Yes. New York taxes SaaS.

If you sell access to software to New York users, the Department of Taxation and Finance treats the subscription as a sale of prewritten computer software, which Tax Law §1101(b)(6) and (b)(14) classify as tangible personal property. It does not matter that the software never leaves your servers. The state rate is 4%; with local tax, combined rates run from 7% to 8.875% depending on the customer's location (Publication 718).

In January 2026 the Appellate Division, Third Department, confirmed a Tax Appeals Tribunal decision assessing $686,570.66 in tax plus $306,698.60 in interest against Beeline.com, a vendor management platform that argued it was selling services rather than software (DTA No. 829516; 2026 NY Slip Op 00175). The court held that the software licence was the core function of the transactions and that the bundled services did not change the result.

This guide covers how New York classifies SaaS, the exceptions, how bundled services are treated, when you have nexus, what rate to charge, and how registration, filing and penalties work. For the position in other states, see the SaaS sales tax by state reference; for the general framework, see the SaaS sales tax guide.

Why SaaS is taxable in New York

Under Tax Law §1101(b)(14), prewritten software is "any computer software that is not designed and developed by the author or other creator to the specifications of a specific purchaser". If a product is sold to more than one customer, it is prewritten. Prewritten software is tangible personal property, and its sale, including the sale of a licence or right to use it, is taxable.

Tax Bulletin TB-ST-128 states that the method of delivery does not change this. The software can be:

• downloaded,
• installed from physical media,
• accessed through a web browser (SaaS),
• accessed via an API, or
• accessed through a vendor portal,

and each is taxed the same way. The rule applies whether the customer is a business or an individual.

The same bulletin sets the sourcing rule: the sale is sourced to the location from which the purchaser uses or directs the use of the software. If a customer has users both inside and outside New York, the vendor may collect tax on the portion of the charge attributable to New York users, based on the purchaser's documentation of user locations.

What is not taxable: custom software and separately stated services

Custom software. Software designed and developed to the specifications of a single purchaser is not prewritten software and its sale is not taxable. The definition is narrow. Configuring or customising a prewritten product for one customer does not make the product custom; only the separately stated charge for the customisation work can be exempt. If custom software is later sold to another customer, it becomes prewritten software from that point.

Services sold with software. New York's default rule is that services are not taxable unless Tax Law §1105(c) lists them. Consulting, training, implementation and most professional services are not listed. But when those services are sold together with prewritten software, TB-ST-128 is explicit:

When otherwise exempt services are provided in conjunction with the sale of prewritten software, the charge for the service is exempt from tax only when the charge for the service is reasonable and separately stated on the invoice or billing statement given to the customer.

A $5,000 monthly invoice for "platform subscription and customer success" may therefore be taxable in full. Itemise it as "$4,000 software access" and "$1,000 implementation services" and only the $4,000 is taxable, provided the split is reasonable.

Exempt purchasers. Purchases of prewritten software used directly and predominantly in research and development, or in production, may qualify for exemption when the purchaser gives you a properly completed Form ST-121. Sales to exempt organisations require the appropriate exemption document. Without a certificate on file, the sale is taxable.

Infrastructure and hosting. Charges for raw computing capacity are analysed differently from charges for access to an application, but the line is fact-specific and New York's advisory opinions turn on what the customer actually receives. Do not assume a "platform" product falls outside the prewritten software rule.

The Beeline decision: labelling a product a "service" does not change its classification

Beeline operated a vendor management system. Customers paid to access a platform that handled contingent-labour onboarding, time tracking and invoicing. Beeline argued that customers were buying workflow services and that the software was incidental.

The Tax Appeals Tribunal disagreed, sustaining the assessment for the June 2010–May 2016 audit period (DTA No. 829516, May 2, 2024). In Matter of Beeline.com, Inc. v State of N.Y. Tax Appeals Trib., 2026 NY Slip Op 00175 (3d Dept, January 15, 2026), the Appellate Division confirmed the Tribunal's determination. Its reasoning:

• the customer agreements granted a right to use the software, which is a licence of prewritten software under the Tax Law;
• the software was central to Beeline's services rather than incidental, and had market value distinct from the services; and
• the licence was therefore the core function of the transactions, making them taxable sales of tangible personal property.

The practical test that emerges: if your customer is paying to use your software, you are selling prewritten software. If your customer is paying for human professional judgment and software is genuinely incidental to that, you may be selling a non-taxable service, but the burden of showing that is on you, and Beeline shows how high the bar is.

New York sales tax nexus

You must collect New York sales tax only if you have nexus with the state. New York recognises physical and economic nexus; either is enough.

Economic nexus

A business with no physical presence in New York must register and collect if, in the immediately preceding four sales tax quarters (the quarters run March–May, June–August, September–November and December–February), it had both:

• more than $500,000 in cumulative gross receipts from sales of tangible personal property delivered into New York, and
• more than 100 sales of tangible personal property delivered into New York.

Both conditions must be met (TSB-M-19(4)S and the Tax Department's nexus page). Gross receipts include exempt sales of tangible personal property. Because New York classifies prewritten software as tangible personal property, SaaS subscriptions to New York users generally count toward both tests; a tax adviser should confirm this for your specific product mix.

Two illustrations of how the dual test works:

• A SaaS company with two New York enterprise customers paying $300,000 a year each, invoiced monthly, has $600,000 of receipts but only 24 sales. It has not crossed the threshold.
• A SaaS company with 200 New York customers paying $10 a month has 2,400 sales but only $24,000 of receipts. It has not crossed the threshold either.

Small-ticket B2C SaaS can stay under the dollar test for longer than founders expect; large-ticket enterprise SaaS needs to watch the sale count.

Physical nexus

Physical presence creates nexus regardless of revenue (Tax Department nexus guidance). The usual triggers for a SaaS company are:

• an office or other place of business in New York;
• an employee, agent or representative working in New York, including a fully remote employee; and
• property, including inventory or servers, located in New York.

A single engineer working from Brooklyn creates nexus for the whole company, whether or not you have New York customers yet.

Once you have nexus, you must register for a Certificate of Authority before making taxable sales, then collect, file and remit for each period.

Rates: New York is destination-based

New York sources sales to the customer's location, so you charge the combined rate where the software is used, not a single statewide rate. The state rate is 4%; counties and cities add their own; and the Metropolitan Commuter Transportation District (MCTD) adds ⅜% in New York City and in Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk and Westchester counties. Current rates are in Publication 718 (effective March 1, 2025 edition at the time of review):

The lowest combined rate in the state is 7%. Charging every New York customer the New York City rate is a common billing error: it over-collects from customers outside the city and under-collects nothing, but it still has to be corrected and refunded.

A worked example

A SaaS provider based in San Francisco has 125 New York business customers paying $200 a month, none with exemption certificates on file:

That is about $26,000 a year in New York sales tax. If the provider has had nexus for three years and has not collected, the tax exposure is roughly $78,000 before penalties and interest. The late-filing and late-payment penalty is 10% of the tax due for the first month plus 1% for each additional month, up to 30% (Sales and Use Tax Penalties); interest accrues from the due date, compounded daily, at a rate the Department may adjust quarterly (TB-ST-275).

Registration, filing frequency and due dates

Registration is through New York Business Express. You will need your federal EIN, business address, responsible-person details, an estimate of New York taxable sales, and a bank account for electronic payments.

Apply at least 20 days before you begin making taxable sales in New York. Operating without a Certificate of Authority carries a penalty of up to $500 for the first day plus up to $200 for each additional day, capped at $10,000 (TB-ST-360).

Filing frequency is assigned by the Department (TB-ST-275):

• Quarterly is the default for new registrants.
• Annual filing applies if your total tax due for the annual period is $3,000 or less.
• Monthly (part-quarterly) filing is required once taxable receipts reach $300,000 or more in a quarter.

Returns are due 20 days after the end of the period. A return is required for every period, including periods with no sales; the minimum late-filing penalty is $50.

If you already have New York customers

Under $500,000 of New York receipts or 100 or fewer New York sales in the last four quarters, no New York employees, no New York property. No current collection obligation. Track both tests every quarter.

Over both thresholds, not registered, not charging tax. You have an exposure equal to the tax you should have collected, plus penalties and interest. Its size depends on how long the position has existed and how many customers can supply exemption certificates after the fact. Depending on eligibility and the facts, New York's voluntary disclosure programme may be worth discussing with a tax adviser.

A New York employee, whatever your customer base. You have physical nexus. Register before your next taxable sale to a New York customer.

Charging tax on the full bundled price. If your invoices do not separate software from implementation, training or support, charging tax on the whole amount is consistent with TB-ST-128: otherwise-exempt services sold with prewritten software are exempt only when their charge is reasonable and separately stated, so an unitemised bundle may be taxable in full. If part of the bundle is genuinely a non-taxable service, separately stating a reasonable charge for it on future invoices is what allows that portion to be treated as exempt. Whether tax already collected on past bundled invoices can be refunded depends on the facts and on the Tax Department's refund rules.

Frequently asked questions

Is SaaS taxable in New York in 2026?

Yes. Remotely accessed prewritten software is taxable as tangible personal property at the state rate of 4% plus local tax, for combined rates of 7% to 8.875% depending on the customer's location.

Is downloaded software taxable in New York?

Yes. Prewritten software is taxable however it is delivered. Only software designed and developed for a single specific purchaser is outside the definition.

Are services taxable in New York?

Generally no. Services are taxable only if enumerated in Tax Law §1105(c), which includes information services, certain installation and maintenance services and protective services, among others. Consulting, legal, accounting and most professional services are not taxable, but when sold with software they must be reasonable and separately stated to keep that treatment.

What is New York's economic nexus threshold for SaaS?

More than $500,000 in gross receipts from sales of tangible personal property delivered into New York and more than 100 such sales, both measured over the immediately preceding four sales tax quarters.

How far back can New York audit me?

Generally three years from when a return was filed. Where no return was filed, or a false return was filed with intent to evade tax, there is no limitation period (Publication 130-D).

New York primary sources used in this guide

• Tax Law §1101 – definitions of tangible personal property and prewritten computer software
• Tax Law §1105 – imposition of tax, including the enumerated taxable services
• TB-ST-128, Computer Software – taxability, sourcing, bundled services, exemptions
• Nexus guidance and TSB-M-19(4)S – economic and physical nexus
• TB-ST-360 – registration and penalties for operating without a Certificate of Authority
• TB-ST-275 – filing frequency and due dates
• Publication 718 – local rates
• Sales and Use Tax Penalties
• Matter of Beeline.com, Inc., DTA No. 829516 (Tax Appeals Tribunal, 2024) and 2026 NY Slip Op 00175 (Appellate Division, Third Department, 2026)

Need your New York exposure sized?

Taxolio's SaaS sales tax service starts with a nexus and taxability review of your top states, with citations to each state's guidance, followed by registrations and ongoing filings reviewed by a person before submission. Book a call to start with New York.