California hosts many software and e-commerce companies but has one of the most complex sales tax systems in the US. Here's what you need to know about California sales tax obligations, registration requirements, and compliance.

## Quick Reference

| Item                    | Details                                                                             |
| ----------------------- | ----------------------------------------------------------------------------------- |
| **State Tax Rate**      | 7.25% (6% state + 1.25% mandatory local)                                            |
| **District Tax Range**  | 0% - 3.5%                                                                           |
| **Combined Rate Range** | 7.25% - 10.75%                                                                      |
| **Economic Nexus**      | $500,000 in current or previous calendar year                                       |
| **Physical Nexus**      | Any presence in California                                                          |
| **SaaS Taxable**        | No (exempt as service)                                                              |
| **Registration Portal** | [CDTFA Seller's Permit Portal](https://cdtfa.ca.gov/taxes-and-fees/sutprograms.htm) |

## California Sales Tax Fundamentals

California imposes two complementary taxes administered by the [California Department of Tax and Fee Administration (CDTFA)](https://cdtfa.ca.gov/taxes-and-fees/sutprograms.htm):

- Sales tax applies to retail sales of tangible personal property within California
- Use tax applies to the use, consumption, or storage in California of tangible goods purchased out of state when sales tax was not charged

From a remote seller's standpoint, you collect "use tax," but the rate, reporting, and payment process mirror sales tax, so this guide refers to both as sales tax.

The statewide base rate is 7.25% (6% state + 1.25% mandatory local). Voter-approved district taxes can raise the combined rate to 10.75% in certain cities. Always charge the rate that applies at the customer's location. Use the CDTFA's [District Tax Rate Lookup](https://www.cdtfa.ca.gov/taxes-and-fees/rates.aspx) to verify current total rates by address.

> Tax you collect belongs to the state. Track it separately and remit it on time - penalties start at 10% of the unpaid amount.

## Nexus: When Are You Required to Collect?

You must register, collect, and remit California sales tax once you establish nexus - a significant connection to the state.

### Physical nexus

Triggered by any physical presence, including:

- Office, store, warehouse, or fulfillment center in California
- Employees, contractors, or sales reps working in the state
- Inventory stored in a California facility (e.g., Amazon FBA)
- Company-owned equipment or servers located in California
- Trade-show activity exceeding 15 days or $100,000 in sales per year

### Economic nexus

Under [Assembly Bill 147 (2019)](https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB147), a remote seller has nexus if sales of tangible personal property delivered into California exceed $500,000 in the current or previous calendar year. Cross the threshold and you must register immediately.

Small-seller relief: If you have no physical presence and under $500,000 in California sales, you are not required to collect. Monitor your sales so you can register promptly once you approach the limit.

## What Is Taxable?

| Category                                                       | Taxable in CA?      | Notes                                                                                                                                                             |
| -------------------------------------------------------------- | ------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| Tangible personal property (clothing, electronics, home goods) | Yes                 | Default rule; exemptions are limited (most groceries, prescription drugs)                                                                                         |
| SaaS (pure cloud access, no physical media)                    | No                  | Covered by [Regulation 1502](https://www.cdtfa.ca.gov/lawguides/vol1/sutr/1502.html) - software accessed via the cloud is a service, not a sale of tangible goods |
| Digital downloads (e-books, music, software)                   | No                  | Non-taxable when delivered electronically without a physical copy                                                                                                 |
| Services (consulting, custom software development)             | No                  | Installation labor may be taxable if part of a product sale                                                                                                       |
| Bundled tangible + digital or SaaS                             | Yes (entire bundle) | Shipping any physical item can make the whole transaction taxable                                                                                                 |

## Rate Sourcing: Hybrid Origin/Destination Rules

California uses modified-origin sourcing:

- State, county, and city portions follow the origin - your California place of business
- District taxes follow the destination - the customer's delivery address

Remote sellers (economic-nexus only) apply the full destination rate, including all district taxes. Use the CDTFA's [rate-lookup tool](https://www.cdtfa.ca.gov/taxes-and-fees/rates.aspx) to ensure accuracy.

## Registering for a Seller's Permit

1. Apply online via CDTFA's [seller-permit portal](https://www.cdtfa.ca.gov/services/permits-licenses.htm)
2. Provide business details (entity type, EIN, addresses, projected sales)
3. Registration is free, though CDTFA may request a security deposit for high-risk accounts
4. Post the permit at any California business location
5. Use your permit number to issue resale certificates on wholesale purchases

## Collecting, Filing, and Remitting

| Step                | Action                                                                                                                                                                           |
| ------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |
| Configure platforms | Enable CA tax in your e-commerce or billing software. For CA-based sellers, combine origin base rate with destination district rate. Remote sellers charge full destination rate |
| Filing frequency    | CDTFA assigns monthly, quarterly, or annual cadence based on tax volume                                                                                                          |
| File returns        | Report total and taxable sales, tax collected, and allocate by jurisdiction. File online through your CDTFA account                                                              |
| Pay tax             | Remit electronically by the due date to avoid 10% late penalties plus interest                                                                                                   |
| Zero returns        | File even if no CA sales occurred during the period                                                                                                                              |
| Record-keeping      | Retain records for at least 4 years                                                                                                                                              |

## Marketplace Facilitators

Since October 1, 2019, large marketplaces (Amazon, eBay, Etsy, etc.) must collect and remit CA tax on your behalf. Their sales still count toward your $500,000 threshold. If you sell both on marketplaces and direct, register once you exceed the threshold and collect on direct sales only.

## Best Practices for Smooth Compliance

- Monitor sales against the $500,000 threshold
- Automate calculations - turn on the tax engine in Stripe, Shopify or any other billing platform for California if you established nexus
- Subscribe to CDTFA updates - local district rates change frequently
- Consider signing up for [Afternoon.co](https://afternoon.co?utm_source=blog) - we can put your sales tax on autopilot

## Official Resources

- [CDTFA Sales & Use Tax Overview](https://www.cdtfa.ca.gov/taxes-and-fees/sutprograms.htm)
- [CDTFA Seller's Permit & Registration](https://www.cdtfa.ca.gov/services/permits-licenses.htm)
- [AB 147 (2019) – Marketplace Facilitator Act](https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB147)
- [CDTFA Wayfair & Remote Seller FAQ](https://www.cdtfa.ca.gov/industry/wayfair)
- [CDTFA District Tax Rate Lookup](https://www.cdtfa.ca.gov/taxes-and-fees/rates.aspx)
- [CDTFA Regulation 1502 – Computers, Programs & Data Processing](https://www.cdtfa.ca.gov/lawguides/vol1/sutr/1502.html)
- [CDTFA Publication 101 – Basic Sales & Use Tax](https://cdtfa.ca.gov/formspubs/pub101/)
- [CDTFA Publication 107 – Out-of-State Sellers](https://www.cdtfa.ca.gov/formspubs/pub107)

California Sales Tax Guide for SaaS and E‑Commerce Businesses

Florida imposes a 6% state sales tax plus county surtaxes ranging from 0.5% to 1.5%, reaching a maximum combined rate of 7.5%. Here's what SaaS and e-commerce businesses need to know about Florida sales tax obligations, registration requirements, and compliance.

## Quick Reference

| Item                    | Details                                                                                          |
| ----------------------- | ------------------------------------------------------------------------------------------------ |
| **State Tax Rate**      | 6%                                                                                               |
| **County Surtax Range** | 0% - 1.5%                                                                                        |
| **Combined Rate Range** | 6% - 7.5%                                                                                        |
| **Economic Nexus**      | $100,000 in prior calendar year                                                                  |
| **Physical Nexus**      | Any presence in Florida                                                                          |
| **SaaS Taxable**        | No (exempt as service)                                                                           |
| **Registration Portal** | [Florida Department of Revenue](https://floridarevenue.com/taxes/taxesfees/Pages/sales_tax.aspx) |

## Nexus: When Florida Rules Apply

### Economic Nexus

Starting July 1, 2021, remote sellers and marketplace providers must register for Florida sales tax when their taxable sales into Florida exceed $100,000 in the prior calendar year. This applies only to taxable sales of tangible personal property, specified digital goods, and taxable services. Non-taxable services like SaaS do not count toward the threshold.

### Physical Nexus

You establish physical nexus if you have any presence in Florida: inventory in a Florida warehouse, employees, contractors, offices, or agents operating in-state.

## Registration and Compliance

### Sales Tax Certificate

Register for a Florida Sales and Use Tax Certificate through the Florida Department of Revenue's online registration portal. You'll need business entity information, FEIN, and an estimate of taxable sales.

### Filing Frequency & Tax Rates

Florida charges 6% state tax plus county surtaxes ranging from 0.5% to 1.5% (maximum 7.5% total).

- File monthly if your tax liability is significant
- Otherwise you may file quarterly or annually

Returns are due by the 20th day of the month following the reporting period.

## Taxability of Goods and Services

### Tangible Personal Property

Physical goods shipped into Florida are taxable at state plus local surtax rates, unless exempt. Groceries, prescription medicines, and some medical devices are exempt.

### Digital Goods and SaaS

Digital goods like ebooks, digital music, movies, online games, and codes delivered electronically are considered specified digital products and are taxable under Florida law.

Florida does not impose sales tax on SaaS or other digital subscription services delivered entirely online. SaaS is treated as an intangible service and is not taxable. This includes platforms accessed via browser or cloud infrastructure.

If SaaS is delivered via tangible media (USB, CD) or bundled with taxable goods, it may become taxable.

## E‑Commerce Businesses: Tangible vs. Digital Products

### Tangible Goods

Physical goods shipped into Florida are taxable if nexus is met. You must collect the appropriate sales tax including local surtax for each customer location. Marketplace transactions count toward nexus even when the facilitator collects tax.

### Digital Downloads

Electronically delivered ebooks, software downloads, games, or digital codes are treated as specified digital products and are taxable.

### Marketplace Facilitators

Marketplace facilitators (Amazon, Etsy, etc.) with nexus must collect and remit sales tax on behalf of third-party sellers. If you sell exclusively through a certified marketplace, the marketplace handles tax collection, but you may still need to register if you also sell elsewhere.

If you collect no tax because the certified facilitator collects on your behalf, you likely must still file a zero-return periodically.

## Exemptions & Special Cases

- Nonprofit organizations and government purchasers may be exempt; keep valid exemption certificates on file
- Resale certificates apply when reselling taxable products; maintain proper documentation
- Bundled offerings must clearly separate taxable digital goods from non-taxable SaaS
- Mixed delivery packages may be taxable if SaaS includes downloadable software on physical media

## Glossary of Key Terms

| Term                           | Definition                                                                                            |
| ------------------------------ | ----------------------------------------------------------------------------------------------------- |
| **Economic Nexus**             | $100K+ in Florida taxable sales in prior calendar year                                                |
| **Physical Nexus**             | Presence in Florida via inventory, agents, employees or facilities                                    |
| **Specified Digital Products** | Taxable digital downloads: ebooks, music, software codes                                              |
| **SaaS / PaaS / IaaS**         | Cloud service models that are non-taxable in Florida when delivered electronically                    |
| **Marketplace Facilitator**    | Platform responsible for collecting and remitting tax on third-party sales                            |
| **Zero-Return Filing**         | A report filed showing no net tax due, often required when tax collection is handled by a facilitator |

## Resources

- [Florida Department of Revenue – Sales & Use Tax](https://floridarevenue.com/taxes/taxesfees/Pages/sales_tax.aspx)
- [Florida Department of Revenue – Out-of-State Business Nexus Guidance](https://floridarevenue.com/taxes/businesses/Pages/outstate.aspx)

Florida Sales Tax Guide for SaaS and E‑Commerce Businesses

Michigan imposes a 6% statewide sales tax with no local add‑ons. Here's what SaaS and e‑commerce businesses need to know about Michigan sales tax obligations, registration requirements, and compliance.

## Quick Reference

| Item                    | Details                                                        |
| ----------------------- | -------------------------------------------------------------- |
| **State Tax Rate**      | 6%                                                             |
| **Local Tax Range**     | 0%                                                             |
| **Combined Rate Range** | 6%                                                             |
| **Economic Nexus**      | $100,000 OR 200 transactions in prior calendar year            |
| **Physical Nexus**      | Any presence in Michigan                                       |
| **SaaS Taxable**        | No (exempt as service)                                         |
| **Registration Portal** | [Michigan Treasury Online](https://mto.treasury.michigan.gov/) |

## Nexus: When Michigan Rules Apply

### Economic Nexus

Remote sellers and marketplace facilitators must register for Michigan sales tax if, in the previous calendar year, they had over $100,000 in Michigan gross receipts **or** at least 200 separate transactions. This threshold includes both taxable and exempt sales. Once you cross the limit, register and begin collecting on the next transaction.

### Physical Nexus

You establish physical nexus if you have any presence in Michigan: offices, warehouses, inventory stored in the state, employees, contractors, or trade show appearances.

## Registration and Compliance

### Sales Tax License

Register for a Michigan Sales Tax License through Michigan Treasury Online (MTO). Have your business entity details, FEIN, and estimated Michigan sales ready.

### Filing Frequency & Tax Rates

Michigan charges a flat 6% statewide rate with no local surtaxes.

- File monthly if your tax liability is significant
- Otherwise you may file quarterly or annually

Returns are due by the 20th day of the month following each reporting period.

## Taxability of Goods and Services

### Tangible Personal Property

Physical goods shipped into Michigan are taxable at the 6% rate unless specifically exempt, such as groceries or prescription drugs.

### Digital Goods and SaaS

Prewritten software downloads and digital products like movies, music, or ebooks are taxable. However, cloud‑hosted software (SaaS, PaaS, IaaS) is generally not taxable because no software is transferred to the customer.

## E‑Commerce Businesses: Tangible vs. Digital Products

### Tangible Goods

Physical goods shipped to Michigan customers are taxable once you have nexus. Marketplace sales count toward your nexus calculation even if the facilitator collects the tax.

### Digital Downloads

Digital products delivered electronically—ebooks, software downloads, digital codes, or media—are taxable as tangible personal property.

### Marketplace Facilitators

Marketplace platforms with nexus must collect and remit Michigan tax on facilitated sales. You remain responsible for tracking your total Michigan revenue and filing returns even if the marketplace handles remittance.

## Exemptions & Special Cases

- Nonprofit organizations and government purchasers may be exempt; keep valid exemption certificates on file
- Resale certificates apply when reselling taxable goods or services; maintain proper documentation
- Manufacturing equipment and industrial processing may qualify for exemptions
- SaaS remains non‑taxable unless bundled with downloadable or physical software

## Glossary of Key Terms

| Term                        | Definition                                                                 |
| --------------------------- | -------------------------------------------------------------------------- |
| **Economic Nexus**          | Triggered by $100K sales or 200 transactions into Michigan                 |
| **Physical Nexus**          | Any physical presence: inventory, employees, or agents                     |
| **Digital Goods**           | Electronically delivered items like movies or ebooks, taxable in Michigan  |
| **SaaS / PaaS / IaaS**      | Cloud‑based services not taxable when accessed remotely                    |
| **Marketplace Facilitator** | Platform responsible for collecting and remitting tax on third‑party sales |

## Resources

- [Michigan Department of Treasury – Sales and Use Tax Information](https://www.michigan.gov/taxes/business-taxes/sales-use-tax/information)
- [Sales Tax Institute – Michigan Overview](https://www.salestaxinstitute.com/jurisdiction/michigan)

Michigan Sales Tax Guide for SaaS and E‑Commerce Businesses

New Jersey imposes a 6.625% statewide sales tax with no additional local taxes (except Urban Enterprise Zones). Here's what SaaS and e-commerce businesses need to know about New Jersey sales tax obligations, registration requirements, and compliance.

## Quick Reference

| Item                    | Details                                                                              |
| ----------------------- | ------------------------------------------------------------------------------------ |
| **State Tax Rate**      | 6.625%                                                                               |
| **Local Tax Range**     | 0% (except Urban Enterprise Zones)                                                   |
| **Combined Rate Range** | 6.625%                                                                               |
| **Economic Nexus**      | $100,000 OR 200+ transactions in current or previous calendar year                   |
| **Physical Nexus**      | Any presence in New Jersey                                                           |
| **SaaS Taxable**        | No (exempt as service)                                                               |
| **Registration Portal** | [New Jersey Business Registration](https://business.nj.gov/pages/register-for-taxes) |

## Nexus: When New Jersey Rules Apply

### Economic Nexus

Starting November 1, 2018, remote sellers and marketplace facilitators must collect New Jersey sales tax if, in the current or prior calendar year, they meet either of these thresholds:

- $100,000 or more in gross revenue from sales of tangible personal property, specified digital products, or taxable services delivered into New Jersey; or
- 200 or more separate transactions of those items delivered into New Jersey

You must register and collect tax during the threshold year and the following calendar year. A 30-day grace period applies: you do not collect tax on the transaction that pushes you over the threshold. Instead, you must register and begin collecting after that period.

### Physical Nexus

You establish physical nexus if you have any presence in New Jersey: a warehouse, office, inventory stored in-state, employees, contractors, or agents representing your business there.

## Registration and Compliance

### Sales Tax Certificate

Register for a New Jersey Sales and Use Tax Certificate via the NJ Division of Revenue & Enterprise Services or the Streamlined Sales Tax system if you're eligible.

### Filing Frequency & Tax Rates

New Jersey charges a 6.625% statewide sales tax rate with no additional local taxes (except Urban Enterprise Zones).

- File monthly if your tax liability is significant
- Otherwise you may file quarterly or annually

Returns are due by the 20th day of the month following the reporting period.

## Taxability of Goods and Services

### Tangible Personal Property

Physical goods shipped into New Jersey are taxable, except for exemptions such as clothing, groceries, or medical devices.

### Digital Goods and SaaS

Digital goods like music, ebooks, movies, and software codes delivered electronically are taxable as specified digital products.

Software-as-a-Service, Platform-as-a-Service, and Infrastructure-as-a-Service are typically not taxable in New Jersey. Technical Bulletin TB-72 clarifies that because the software is hosted remotely and not delivered to the customer, it does not constitute tangible personal property subject to sales tax.

However, services classified as information services—such as legal research tools like Westlaw or LexisNexis—are taxable regardless of delivery method.

## E‑Commerce Businesses: Tangible vs. Digital Products

### Tangible Goods

Physical goods shipped into New Jersey are taxable if nexus is met. Marketplace sales count toward nexus even if the facilitator collects the tax.

### Digital Downloads

Electronically delivered digital products—ebooks, software downloads, digital codes, or media—are taxable as specified digital products under ANJ-27.

### Marketplace Facilitators

Marketplace platforms with nexus must collect and remit sales tax on behalf of sellers. If your sales occur through a certified marketplace, you can request non-reporting status via Form C-6205-ST. You must still register if you exceed nexus thresholds or sell through your own channel.

## Exemptions & Special Cases

- Nonprofit organizations and government purchasers may be exempt; keep valid exemption certificates on file
- Resale certificates apply when reselling taxable goods or services; maintain proper documentation
- Bundled services must clearly separate taxable digital products from non-taxable SaaS
- Information services must be evaluated against the state's criteria for taxability

## Glossary of Key Terms

| Term                           | Definition                                                                             |
| ------------------------------ | -------------------------------------------------------------------------------------- |
| **Economic Nexus**             | Triggered by $100K in sales or 200 transactions into New Jersey                        |
| **Physical Nexus**             | Triggered by in-state presence: inventory, agents, or employees                        |
| **Specified Digital Products** | Digitally delivered goods subject to tax: music, ebooks, software downloads            |
| **SaaS / PaaS / IaaS**         | Cloud-based services generally not taxable in New Jersey                               |
| **Information Service**        | Service providing compiled data access (e.g., legal research tools) that is taxable    |
| **Marketplace Facilitator**    | Platform that collects and remits sales tax for third-party sellers                    |
| **Non-Reporting Status**       | Option to avoid filing if all sales are processed by certified marketplace facilitator |

## Resources

- [New Jersey Remote Sellers & Marketplace FAQ](https://www.nj.gov/treasury/taxation/remotesellersfaq.shtml)
- [Publication ANJ-27: Specified Digital Products](https://www.nj.gov/treasury/taxation/pdf/pubs/sales/anj27.pdf)
- [Technical Bulletin TB-72: Cloud Computing & SaaS Guidance](https://www.nj.gov/treasury/taxation/pdf/pubs/tb/tb72.pdf)

New Jersey Sales Tax Guide for SaaS and E‑Commerce Businesses

## Why Tax Deductions Matter for Your E-commerce Company

As a self-funded E-commerce founder, every dollar you keep in your pocket is another dollar you can reinvest to fuel your store's growth. Maximizing tax deductions isn't just a good idea, it's essential to staying competitive and profitable in a crowded marketplace.

Yet, many E-commerce entrepreneurs overlook valuable tax write-offs, often because the tax code feels intimidating or they're simply too busy managing inventory, marketing, and operations. According to Forbes, [93% of businesses leave money on the table at tax time](https://www.forbes.com/sites/groupthink/2015/06/09/entrepreneurs-stop-overpaying-on-taxes/).

Let's simplify things. Here's a clear breakdown of key tax deductions tailored specifically for bootstrapped and self-funded E-commerce businesses:

## Essential Tax Deductions for E-commerce Entrepreneurs

**1. Inventory & Cost of Goods Sold (COGS)** Your inventory expenses (costs to acquire, produce, store, and ship products) are deductible. Proper tracking of COGS is vital to accurately reduce taxable profits.

**2. Shipping & Packaging Costs** Everything from postage fees, courier services (UPS, FedEx, USPS), packaging materials (boxes, tape, bubble wrap), and fulfillment costs are fully deductible.

**3. Online Store Expenses** Expenses related to operating your digital storefront, such as website hosting fees (Shopify, WooCommerce), domain registrations, apps, plug-ins, and other subscription services, are deductible.

**4. Marketing & Advertising Expenses** Your digital advertising (Facebook ads, Google Ads), influencer partnerships, content creation, email marketing tools (Mailchimp, Klaviyo), and promotional giveaways are fully deductible business expenses.

**5. Home Office Deduction** If you run your store from home, you may qualify for the home office deduction. You can deduct expenses based on the square footage of your workspace, including rent or mortgage, utilities, internet, and insurance. See the [IRS guidelines](https://www.irs.gov/businesses/small-businesses-self-employed/simplified-option-for-home-office-deduction) for more details for your situation.

**6. Professional Services (Accounting, Legal, Consulting)** Fees paid to accountants, attorneys, tax consultants, or business advisors who help you manage compliance, bookkeeping, and strategic growth are deductible.

**7. Software & Digital Tools** Expenses for cloud-based accounting software, productivity tools (Slack, Notion), inventory management systems, customer service platforms, and analytics tools are fully deductible.

**8. Travel for Business Events & Trade Shows** Attending industry trade shows, networking events, sourcing trips, or workshops to improve your E-commerce expertise are deductible, including flights, hotels, [meals (50%)](https://www.irs.gov/publications/p463), and transportation.

**9. Payment Processing & Bank Fees** Transaction fees from platforms like Stripe, PayPal, or Shopify Payments and bank account service fees are deductible expenses.

**10. Educational & Professional Development Expenses** Courses, workshops, E-commerce training programs, business books, and memberships in professional organizations directly related to your business are deductible up to [$5,250 per year per employee](https://www.irs.gov/newsroom/frequently-asked-questions-about-educational-assistance-programs).

**11. Samples & Product Testing** The cost of products purchased or manufactured for testing, reviews, or promotional giveaways is deductible.

**12. Photography & Videography Expenses** Professional photography and videography services, props, and staging used for product images, videos, and advertising campaigns are deductible.

**13. Storage Costs** Fees for external storage facilities or warehouses used exclusively for your inventory or supplies are deductible.

**14. Damaged or Unsellable Inventory** Products damaged, spoiled, or otherwise unsellable can be written off, reducing your taxable income.

## What If Your Store Isn't Yet Profitable?

Even if you're not yet turning a profit, deductions remain valuable. They create Net Operating Losses (NOLs), which you can carry forward to offset future profits, significantly reducing future taxes owed. Accurate tracking now means more savings later.

## Keep Your Records Clean & Accurate

Maintaining meticulous records is key to confidently claiming every deduction:

- **Use Accounting Software:** Platforms like [Afternoon.co](https://www.afternoon.co/) simplify bookkeeping, ensuring expenses are properly categorized.
- **Separate Personal & Business Expenses:** Always use dedicated business bank accounts and credit cards.
- **Save Receipts & Documentation:** Digitally archive all receipts and invoices—organized records will protect you during IRS audits.

## Afternoon.co: Built for E-commerce Founders

As a self-funded founder, you can't afford distractions and headaches. Afternoon.co simplifies your tax deductions, bookkeeping, compliance and overall financial management so you can focus on growing your E-commerce empire.

Let us handle the numbers, so you can spend more time selling, innovating, and growing your business.

Ready to maximize your E-commerce store’s tax savings? Let's talk.

Maximizing Your Tax Write-offs as E-commerce Founders

New York taxes most goods and software but exempts most services and digital goods. The state rate is 4%, with local taxes pushing combined rates to 8.875% in some areas. Incorrect collection leads to penalties and interest.

## Quick Reference

| Item                    | Details                                                         |
| ----------------------- | --------------------------------------------------------------- |
| **State Tax Rate**      | 4%                                                              |
| **Local Tax Range**     | 0% - 4.875%                                                     |
| **Combined Rate Range** | 4% - 8.875%                                                     |
| **Economic Nexus**      | $500,000 AND 100+ transactions in previous 4 quarters           |
| **Physical Nexus**      | Any presence in New York                                        |
| **SaaS Taxable**        | Yes (as prewritten software)                                    |
| **Registration Portal** | [New York Business Express](https://www.businessexpress.ny.gov) |

## Nexus in New York

### Physical nexus

Physical presence creates immediate collection obligations:

- Office, warehouse, inventory, or employees in New York
- Independent contractors or affiliates soliciting sales
- Trade show attendance or temporary pop-ups
- Click-through affiliates with >$10,000 in referral sales over four quarters

### Economic nexus

Register and collect when both conditions are met in the four most recent quarters:

- Gross receipts into NY exceed $500,000
- More than 100 separate sales into NY

Register within 30 days of crossing the threshold; begin collection 20 days later.

## Registration and Filing

1. Apply for a Certificate of Authority through [New York Business Express](https://www.businessexpress.ny.gov). Submit at least 20 days before your first taxable sale.
2. Display the certificate in any NY place of business.
3. Filing frequency (monthly, quarterly, annually) is assigned by NY DTF and may change with volume.
4. Returns are due on the 20th of the month following the period. Zero returns are mandatory when no tax is due.
5. Penalties for operating without a certificate range from $500 on day 1 to $10,000 maximum.

## Taxability of Goods and Services

### Tangible personal property

Taxable unless specifically exempt. Key exemptions:

- Most unprepared food
- Clothing or footwear under $110 per item (state and most local tax exempt)

### Digital goods and software

| Category                                            | NY Taxability | Notes                                                    |
| --------------------------------------------------- | ------------- | -------------------------------------------------------- |
| Prewritten software (downloaded, disk, cloud, SaaS) | Taxable       | Treated as tangible property                             |
| Custom software written exclusively for one client  | Exempt        | Must be separately stated and reasonable                 |
| Music, videos, e-books delivered electronically     | Not taxable   | NY doesn't classify digital content as tangible property |

### Services

Services are exempt unless specifically taxable. Information services (database access, credit reporting) are taxable unless data is wholly personal or individualized. Implementation, training, and consulting tied to software remain exempt when separately invoiced.

### Shipping and handling

If any item in the shipment is taxable and you charge one delivery fee, the entire shipping charge is taxable. Allocate only when you have practical documentation.

## SaaS

| Requirement       | Detail                                                                    |
| ----------------- | ------------------------------------------------------------------------- |
| Tax status        | SaaS is "prewritten software" - taxable                                   |
| Sourcing          | Destination-based. Use purchaser location or billing address              |
| Customizations    | Separately stated custom work is exempt; subscription fee remains taxable |
| Exempt purchasers | Accept Form ST-119.1 (exempt org) or ST-120 (resale)                      |
| IaaS/PaaS         | Raw computing power or storage is generally not taxed                     |

## E-Commerce

### Marketplace facilitator rule

Marketplaces (Amazon, Etsy, eBay, Walmart, Shopify Marketplace) must collect NY sales tax on facilitated transactions. You remain responsible for:

- Tracking gross NY sales for nexus determination
- Registering once nexus exists, even if marketplaces remit all tax
- Filing returns that report marketplace sales as "marketplace-collected"

### NY sales tax rates

- State rate: 4%
- Local add-ons push combined rates to 7%–8.875% (NYC highest)

Use NY DTF address-based lookup or automated tools like Stripe Tax.

### Product specific rules

| Product                                             | Tax status                    |
| --------------------------------------------------- | ----------------------------- |
| Clothing/footwear under $110                        | Exempt (state and most local) |
| Dietary supplements                                 | Exempt as food                |
| Physical software (game cartridges, boxed software) | Taxable                       |
| Digital download of software                        | Taxable                       |
| E-book                                              | Not taxable                   |

## References

- [Publication 750](https://www.tax.ny.gov/pdf/publications/sales/pub750.pdf) - General guide
- [TSB-M-19(4)S](https://www.tax.ny.gov/pdf/memos/sales/m19_4s.pdf) - Economic nexus memo
- [ST-128](https://www.tax.ny.gov/pdf/tg_bulletins/sales/b12_128s.pdf) - Software tax bulletin
- [ST-838](https://www.tax.ny.gov/pdf/tg_bulletins/sales/b09_838s.pdf) - Shipping charges
- [Stripe Tax Documentation](https://stripe.com/docs/tax)

New York Sales Tax Guide for SaaS and E-Commerce Businesses

Pennsylvania imposes a 6% state sales tax plus local taxes in Allegheny County (1%) and Philadelphia (2%), reaching a maximum combined rate of 8%. Here's what SaaS and e-commerce businesses need to know about Pennsylvania sales tax obligations, registration requirements, and compliance.

## Quick Reference

| Item                    | Details                                                    |
| ----------------------- | ---------------------------------------------------------- |
| **State Tax Rate**      | 6%                                                         |
| **Local Tax Range**     | 0% - 2% (Allegheny County 1%, Philadelphia 2%)             |
| **Combined Rate Range** | 6% - 8%                                                    |
| **Economic Nexus**      | $100,000 in prior calendar year                            |
| **Physical Nexus**      | Any presence in Pennsylvania                               |
| **SaaS Taxable**        | Yes (as canned software)                                   |
| **Registration Portal** | [Pennsylvania myPATH Portal](https://www.mypath.pa.gov/_/) |

## Nexus: When Pennsylvania Rules Apply

### Economic Nexus

Starting July 1, 2019, remote sellers and marketplace facilitators must register for Pennsylvania sales tax when their gross sales into Pennsylvania exceed $100,000 in the prior calendar year. This includes taxable, exempt, and marketplace transactions. Registration is required by April 1 of the following year if the threshold is exceeded.

### Physical Nexus

You establish physical nexus if you have any presence in Pennsylvania: inventory stored in a PA fulfillment center, offices, employees, or agents operating in the state.

## Registration and Compliance

### Sales Tax License

Register for a Sales, Use & Hotel Occupancy Tax License through the Pennsylvania DOR's myPATH portal. You'll need your business entity information, FEIN, and estimated sales.

### Filing Frequency & Tax Rates

Pennsylvania charges 6% state tax plus local taxes in Allegheny County (1%) and Philadelphia (2%) (maximum 8% total).

- File monthly if your tax liability is high
- Otherwise you may file quarterly or annually

Returns are due by the 20th day of the month following the reporting period.

## Taxability of Goods and Services

### Tangible Personal Property

Physical goods shipped into Pennsylvania are taxable unless exempt items like groceries, clothing, or pharmaceuticals apply.

### Digital Goods and SaaS

Digital goods delivered electronically—such as ebooks, music, videos, software codes—are taxable as specified digital products under Pennsylvania's tax law (Act 84 of 2016).

Pennsylvania considers SaaS and other canned computer software services as tangible personal property and thus taxable under the Tax Reform Code as amended by Act 84 of 2016. Software delivered electronically, streamed, or accessed via subscription is taxable, regardless of medium or support services included.

Custom software written for a single customer is exempt as a non-taxable service. Maintenance, support, setup, configuration, and training bundled with SaaS or canned software are generally taxable unless separately stated and performed after October 30, 2017.

## E‑Commerce Businesses: Tangible vs. Digital Products

### Tangible Goods

Physical goods shipped to Pennsylvania customers are taxable if nexus exists. You must collect the appropriate 6% state tax plus possible local surtax. Marketplace sales count toward nexus even if the facilitator collects tax.

### Digital Downloads

Digital products like ebooks, software downloads, media, or codes are taxable, regardless of delivery method.

### Marketplace Facilitators

Marketplace platforms with nexus and thresholds must collect and remit Pennsylvania tax on third-party sales. Certified facilitators may handle tax collection for sellers, but sellers must still register if they make taxable sales outside the facilitator.

If tax is handled entirely by a certified marketplace facilitator, sellers may need to file zero returns periodically.

## Exemptions & Special Cases

- Nonprofit organizations and government purchasers may be exempt; keep valid exemption certificates on file
- Resale certificates apply when reselling taxable goods or services; maintain proper documentation
- Custom software is exempt when designed for a specific original purchaser and not prewritten
- Training services are non-taxable if separately stated, but bundled instructional fees are taxable

## Glossary of Key Terms

| Term                           | Definition                                                                |
| ------------------------------ | ------------------------------------------------------------------------- |
| **Economic Nexus**             | $100,000+ gross Pennsylvania sales in prior calendar year                 |
| **Physical Nexus**             | Presence in PA via inventory, agents, employees, etc.                     |
| **Specified Digital Products** | Electronically delivered digital goods taxed under Act 84                 |
| **Canned Software**            | Prewritten software or SaaS treated as taxable tangible property          |
| **Custom Software**            | Software developed for a single purchaser—exempt from tax                 |
| **Marketplace Facilitator**    | Platform responsible for collecting and remitting PA sales tax            |
| **Zero-Return Filing**         | Filing with no net tax due when certified facilitator is doing collection |

## Resources

- [Pennsylvania Department of Revenue – Tax Obligations for Online Retailers](https://www.pa.gov/agencies/revenue/resources/tax-types-and-information/tax-obligations-for-online-retailers.html)
- [Sales Tax Institute – Pennsylvania jurisdiction overview and digital goods guidance](https://www.salestaxinstitute.com/jurisdiction/pennsylvania)
- [Sales Tax Institute – Taxability of canned software, SaaS & digital goods in PA](https://www.salestaxinstitute.com/resources/services-to-canned-computer-software-and-digital-goods-are-considered-taxable-in-pa)

Pennsylvania Sales Tax Guide for SaaS and E‑Commerce Businesses

Running a startup shouldn't mean stitching together countless different tools & people just to stay compliant. But for most founders, that's exactly what the back office looks like today: One provider for accounting, another for sales tax, a freelance bookkeeper, a tax accountant, and a compliance laywer for state filings. It’s fragmented, expensive, and easy to mess up.

We believe there’s a better way.

That’s why we started [Afternoon.co](https://www.afternoon.co), an all-in-one back-office platform that unifies compliance, bookkeeping, and taxes into one simple system. And today, we’re excited to share that we’ve raised a $2M pre-seed round, led by [Itamar Novick](https://www.linkedin.com/in/itamarnovick/) at [Recursive Ventures](https://www.linkedin.com/company/recursive-ventures/), to build it.

## One system, one source of truth

At Afternoon, we’re building the modern financial operations stack powered by AI that founders actually want; one that just works. By consolidating core financial and compliance workflows under one roof. When you hire someone in a new state, we will automatically register your business in a new state, start collecting sales tax, and handle all of your corporate taxes & gov't forms. We give startups a single system of record and a single point of accountability for everything.

That means:

- No more dropped balls between vendors
- No more wondering who owns what
- No more guessing if you're fully compliant

Just clean finances, clear reporting, 100% compliance and peace of mind you’re not missing anything.

## Built for founders by founders

We launched in November 2024, and since then we’ve grown fast. Today, over 50 startups and ecommerce brands trust Afternoon.co. Whether it’s sales tax, annual filings, or multi-state payroll tax registration, we handle the complexity so founders can get back to building.

We’re especially grateful to the incredible early customers who bet on us and to the investors who saw the same pain points we did. This round wouldn’t be possible without the support of:

- [Recursive Ventures (lead)](https://www.linkedin.com/company/recursive-ventures/)
- [Network VC](https://www.linkedin.com/company/network-vc/)
- [Treeo VC](https://www.linkedin.com/company/treeo-vc/)
- [Endurance Ventures](https://www.linkedin.com/company/enduranceventures/)

And a group of amazing angels, operators, and founders.

If you're a founder struggling with back-office complexity, drop us a line at founders@afternoon.co or hop in for a quick [demo](https://www.afternoon.co/demo). We’d love to help!

Afternoon.co Raises $2M to Reimagine the Back Office Stack for Founders

## Why Tax Deductions Matter for Your Startup

As a founder of a venture-backed tech startup, every dollar of runway counts. Maximizing your tax deductions is crucial; it could mean an extra few months to build, iterate, and hit your next milestone.

Yet, many founders unknowingly leave money on the table, hesitating due to compliance fears or simply because tax strategy feels overwhelming. According to Forbes, [93% of businesses leave money on the table at tax time](https://www.forbes.com/sites/groupthink/2015/06/09/entrepreneurs-stop-overpaying-on-taxes/). After all, you're busy building something ambitious, not studying IRS guidelines.

That's why clarity matters. Let's break down the critical tax deductions specifically relevant to venture-backed tech startups and how to claim them confidently:

## Key Tax Deductions for Venture-Backed Tech Startups

**1. Legal Fees (Incorporation, Fundraising, SAFE Agreements)** Costs for incorporating your business, structuring fundraising rounds (including SAFE agreements), and other legal compliance are fully deductible. If you've been through Y Combinator, you know how quickly these can stack up—claim every dollar.

**2. Stock Option Plan Costs (Valuations & Administration)** 409A valuations and legal fees to set up and administer your equity plan are deductible expenses. Properly documented, they significantly reduce your tax burden and keep you compliant.

**3. R&D Tax Credits (Product Development Expenses)** Many tech founders miss out on claiming R&D tax credits. If you're investing in engineering talent, product prototyping, or innovative software solutions, you likely qualify for significant R&D credits. Don’t overlook these savings; they directly reward your innovation.

**4. Software Expenses (Cloud Infrastructure, Developer Tools)** Expenses for cloud infrastructure (AWS, Google Cloud), SaaS subscriptions (Stripe, Slack, Notion), and developer tools (GitHub, Figma) are 100% deductible. Track these consistently to maximize savings.

**5. Home Office Deduction** If you work from home, you may qualify for the home office deduction. You can deduct expenses based on the square footage of your workspace, including rent or mortgage, utilities, internet, and insurance. See the [IRS guidelines](https://www.irs.gov/businesses/small-businesses-self-employed/simplified-option-for-home-office-deduction) for more details for your situation.

**6. Salaries, Benefits, and Payroll Taxes** Your largest expenses—employee salaries, payroll taxes, and benefits—are fully deductible. This also includes equity administration costs tied to issuing and managing stock options.

**7. Travel for Fundraising & Conferences (Including all expenses while you’re in YC)** Travel to investor meetings, pitch competitions, industry conferences, and demo days (like YC Demo Day) are deductible. Airfare, lodging, transportation, and [meals (50%)](https://www.irs.gov/publications/p463), directly tied to these trips count. If you moved to SF for YC, you’re entire trip’s expenses can qualify as well.

**8. Professional Services (Legal, Accounting, Advisory)** Hiring experts like accountants, attorneys, consultants, and strategic advisors is common—and deductible—for venture-backed startups.

**9. Marketing & Advertising** Product launches, digital ads, content creation, branding, and growth marketing campaigns are fully deductible. Document these carefully to capture every eligible dollar.

**10. Educational & Professional Development Expenses** Courses, workshops, training programs, business books, and memberships in professional organizations directly related to your business are deductible up to [$5,250 per year per employee](https://www.irs.gov/newsroom/frequently-asked-questions-about-educational-assistance-programs).

**11. Ensure you're claiming the full deduction of domestic R&D expenses** moving forward and in the past as Section 174 is now reversed. [We wrote an entire write up about this here](https://www.afternoon.co/blog/section-174-is-reversed).

## Utilizing Deductions When You're Not Profitable (Net Operating Losses)

If your startup isn’t yet profitable, deductions can still deliver significant value by generating Net Operating Losses (NOLs). NOLs occur when your deductible expenses exceed your revenue, and they can be carried forward to offset future taxable income. For venture-backed startups, this means current losses can become valuable tax shields when you eventually become profitable. Keep meticulous records of these losses to strategically utilize them in future tax years.

## How to Ensure Accurate Deductions and Compliance

Accuracy matters—incorrect claims invite IRS headaches. Here’s how to protect your startup:

- **Use Accounting Software:** Tools like [Afternoon.co](https://www.afternoon.co/) help automate expense categorization, ensuring you don't miss valuable deductions.
- **Keep Organized Records:** Digitally store receipts, invoices, and proof of expenses. Clean documentation is your best defense in case of audits.
- **Separate Business & Personal Finances:** Mixing finances leads to unnecessary tax confusion. Open dedicated business accounts to streamline compliance.
- Understand Compliance Around Equity:\*\* Equity compensation requires special handling for IRS reporting. Make sure your valuation and stock options administration align with regulatory requirements.

## Afternoon.co: Built for Venture-Backed Founders

Tax deductions shouldn't drain your time. They should help you grow faster. Afternoon.co is an all-in-one back-office solution designed specifically for venture-backed tech startups. We handle bookkeeping, maximize your eligible deductions, simplify compliance around equity and R&D credits, and give you clear visibility into your financial health.

You're focused on building something extraordinary. Let us handle the back office, so you can keep your runway long and your investors happy.

Ready to optimize your startup’s finances? Let's chat.

Maximizing Tax Write-offs for VC-backed Startups

## TL;DR

- [Section 174 is reversed](https://abgi-usa.com/section174/latest-and-greatest). All domestic R&D expenses no longer have to be amortized over five-year periods.
- Qualifying startups can immediately get tax refunds for all historically amortized R&D expenses since 2022.
- You should work with your accountant to review your 2022, 2023, and 2024 tax returns.
- If necessary, prepare and file amended returns for 2022, 2023, and 2024 to claim refunds for taxes paid as a result of amortization. Alternatively, you can choose to take a catch-up deduction in your 2025 tax return (or split between 2025 and 2026).
- **Election Deadline:** You must file amended returns within one year of the bill’s enactment.

As part of the [One Big Beautiful Bill Act (OBBBA)](https://www.congress.gov/bill/119th-congress/house-bill/1/text), Section 174 amortization is officially repealed; no more five-year wait for deductions. Additionally, you may be eligible for retroactive relief and immediate tax refunds for all historically amortized R&D expenses since 2022. You will need to amend returns for 2022–2024 to recover amortized costs within one year of the bill's enactment.

## What was Section 174 amortization?

Since 2022, [Section 174 required businesses to amortize U.S. R&D expenses over five years](https://www.thomsonreuters.com/en-us/posts/tax-and-accounting/section-174-expenditures/) (and 15 years for most foreign R&D).

## New section 174A

Updated Section 174A of the Internal Revenue Code allows **immediate full expensing** of **domestic** research and experimental (R&E) expenditures, reversing the 5-year amortization requirement imposed under the 2017 Tax Cuts and Jobs Act (TCJA) for these expenses.

Additionally, eligible small businesses (under $31M in gross receipts per year) with capitalized domestic R&D expenses from 2022–2024 can opt for full deductions for tax years starting after 2021 in your 2025 tax return (or split between 2025 and 2026), OR amend prior year returns to reclaim previously amortized costs.

## Who qualifies for retroactive expensing?

If your business has average annual gross receipts of $31 million or less (using the Section 448(c) test), you can apply the Section 174 repeal retroactively for tax years beginning after December 31, 2021.

## What does this mean for your company?

If your business has average annual gross receipts of $31 million or less (using the Section 448(c) test):

- Review your 2022, 2023, and 2024 tax returns: Identify all domestic R&D expenses that were previously amortized.
- Prepare and file amended returns for 2022, 2023, and 2024 to claim refunds for taxes paid as a result of amortization.
- Alternatively, you can choose to take a catch-up deduction in your 2025 tax return (or split between 2025 and 2026).
- **Election Deadline:** You must make this election within one year of the bill’s enactment.

## Effective date

Any expenditures after December 31, 2024 are eligible to be deducted in full in this tax year.

## How Afternoon can help

[Afternoon.co](http://Afternoon.co) is an accounting platform that takes care of bookkeeping, state compliance, year-end taxes, and sales tax for startups. We serve dozens of YC companies, and would be happy to advise you on Section 174 changes and help submit amended returns.

If you would like to consult about the impact of this change on your company, please schedule a call with us [here](https://afternoon.co/demo).

Section 174 Is Reversed: All US-Based R&D Expenses Are Now Fully Deducted

Texas imposes a 6.25% state sales tax plus up to 2% local tax, reaching a maximum combined rate of 8.25%. Here's what SaaS and e-commerce businesses need to know about Texas sales tax obligations, registration requirements, and compliance.

## Quick Reference

| Item                    | Details                                                                             |
| ----------------------- | ----------------------------------------------------------------------------------- |
| **State Tax Rate**      | 6.25%                                                                               |
| **Local Tax Range**     | 0% - 2%                                                                             |
| **Combined Rate Range** | 6.25% - 8.25%                                                                       |
| **Economic Nexus**      | $500,000 in preceding 12 months                                                     |
| **Physical Nexus**      | Any presence in Texas                                                               |
| **SaaS Taxable**        | Yes (as data processing service)                                                    |
| **Registration Portal** | [Texas Comptroller eSystems](https://comptroller.texas.gov/taxes/sales/permits.php) |

## Nexus: When Texas Rules Apply

### Economic Nexus

Starting October 1, 2019, remote sellers and marketplace providers must register for Texas sales tax when their gross revenue into Texas exceeds $500,000 in the preceding 12 calendar months. This includes all sales types: taxable, non‑taxable, and exempt transactions, including marketplace‑driven sales. Once you hit the threshold, start collecting tax the following quarter.

### Physical Nexus

You establish physical nexus if you have any presence in Texas: an office, warehouse, inventory stored in a Texas facility, or agents operating in the state.

## Registration and Compliance

### Sales Tax Permit

Register for a Texas Sales and Use Tax Permit through the Texas Comptroller's eSystems portal. You'll need your business entity information, FEIN, and estimated annual Texas sales.

### Filing Frequency & Tax Rates

Texas charges 6.25% state tax plus up to 2% local tax (maximum 8.25% total).

- File monthly if your tax liability exceeds $500
- File quarterly if between $100–$500/month
- File annually if under $100/month

Returns are due by the 20th day of the month following each reporting period.

### Single Local Use Tax Rate Option

Remote sellers can elect a simplified 1.75% single local use tax rate instead of destination‑based local rates. Notify the Comptroller using Form 01‑799 to make this election.

## Taxability of Goods and Services

### Tangible Personal Property

Physical goods shipped to Texas are taxable at the full state plus local rate.

### Digital Goods and SaaS

Texas treats SaaS as a taxable data processing service. This includes web hosting, data storage, reporting, conversion, and website maintenance services.

#### Partial Data Processing Exemption

Texas provides a 20% exemption on data processing service charges. So a $1,000 SaaS subscription is taxable on $800 at the state plus local rate.

#### Bundling Rules & Recent Updates

The Comptroller is updating Administrative Rule §3.330 to clarify that SEO, lead generation, and web design services may be taxable if they involve computerized data manipulation or storage. Services without standalone value or purely ancillary to nontaxable services remain exempt.

## E‑Commerce Businesses: Tangible vs. Digital Products

### Tangible Goods

Physical goods shipped into Texas are taxable unless you're under the $500K economic nexus threshold. Marketplace sales count toward your nexus calculation even if the facilitator collects tax.

### Digital Downloads

Electronically delivered software, media, games, or apps are treated as tangible personal property and taxed accordingly.

### Marketplace Facilitators

Marketplace facilitators (Amazon, Shopify, etc.) with nexus must collect and remit sales tax for all platform transactions. Sellers using certified facilitators may avoid needing their own permit, but must keep the facilitator's certification to avoid audit risk.

## Exemptions & Special Cases

- Nonprofit organizations and government purchasers may be exempt; keep valid exemption certificates on file.
- Resale certificates apply when reselling SaaS or products; maintain proper documentation.
- Bundled services must clearly separate non‑taxable internet access to avoid taxation on that portion.
- Ancillary services without separate value remain non‑taxable under updated data processing rules.

## Glossary of Key Terms

| Term                          | Definition                                                                     |
| ----------------------------- | ------------------------------------------------------------------------------ |
| **Economic Nexus**            | Tax obligation based on $500K+ gross Texas revenue (all sales types)           |
| **Physical Nexus**            | Triggered by physical presence: inventory, offices, agents, events             |
| **Data Processing Service**   | Taxable service category in Texas, includes SaaS and hosting                   |
| **SaaS**                      | Software‑as‑a‑Service, delivered online                                        |
| **Partial Exemption**         | 20% exemption on charges for data processing services                          |
| **Marketplace Facilitator**   | Platform that handles sales for third‑party sellers                            |
| **Single Local Use Tax Rate** | Option to charge flat ~1.75% local tax statewide instead of actual local rates |

## Resources

- [Texas Comptroller Remote Sellers & Marketplace FAQ](https://comptroller.texas.gov/taxes/sales/remote-sellers-marketplace-faq.php)
- [Texas Comptroller Publication 94‑127: Data Processing Services](https://comptroller.texas.gov/taxes/publications/94-127.php)

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