Tax preparation for SaaS companies
Tax preparation for SaaS companies.
A tax return is only as good as the books it's built from. Because we close your books every month, tax season starts from reconciled, accrual-basis numbers instead of a scramble.
What we prepare
- Federal and state business returns for C corporations, S corporations and partnerships
- Delaware franchise tax and annual report for Delaware corporations
- R&D credit (§41) review, and the forms if you qualify
- §174 research and software development costs handled on the return
- 1099s for contractors
- Estimated tax planning through the year
- State returns where your sales or team create a filing requirement
Delaware corporations file an annual report and pay franchise tax by March 1. The first bill often looks alarming because Delaware calculates it from the number of authorized shares; the assumed par value capital method usually brings it down for startups. We file it the way that applies to you.
Sales tax nexus and filing
Since 2018, states can require sales tax from out-of-state sellers once sales into the state pass a threshold, even with no office there. Whether SaaS is taxable at all depends on the state.
- An economic nexus study: which states your sales have crossed a threshold in
- A taxability review: whether your product is taxable in each of those states
- Registration where you need it, and nowhere you don't
- Tax collection set up in your billing system
- Returns and payments on each state's schedule
- A voluntary disclosure plan if you crossed thresholds before collecting
For example, New York treats SaaS as taxable software, Texas taxes it as a data processing service on 80% of the price, and California generally does not tax it. Rules change, so we check your states against current law, not last year's list.
Why is my Delaware franchise tax bill so high?
Delaware's notice is calculated with the authorized shares method, which can produce a very large number for startups with many authorized shares. Filing with the assumed par value capital method, which uses your assets and issued shares, is often far lower.
Do we qualify for the R&D credit?
Building and improving software often counts as qualified research under §41, but it depends on the work and how it's documented. Qualified small businesses may be able to apply part of the credit against payroll taxes. We review it with you before claiming anything.
What is economic nexus?
A state's rule that you owe sales tax there once your sales into the state pass its threshold, usually a dollar amount and in some states a number of transactions, even without a physical presence. Thresholds differ by state.
We never collected sales tax. What now?
We size the exposure state by state and work out the cleanest way forward, which can include voluntary disclosure agreements that limit penalties.