US sales tax for Indian SaaS companies: what changes when you cross $100,000

How US sales tax works

• There is no federal sales tax. Sales tax is imposed by states — 45 states plus Washington, D.C. have a statewide sales tax — and often by cities and counties on top.
• The seller collects the tax from the customer and files returns with each state where it is registered.
• Whether you must collect depends on two questions: do you have nexus in that state, and is what you sell taxable there?

Economic nexus: the $100,000 question

Since the US Supreme Court’s 2018 decision in South Dakota v. Wayfair, states can require remote sellers to collect sales tax based purely on sales into the state — no office or staff needed. This is economic nexus.

• The most common threshold is $100,000 of sales into a state in the current or prior year.
• Some large states use higher thresholds — for example $500,000 in California and Texas.
• Many states used to add a “200 transactions” test; a growing number (17 by August 2026, most recently Illinois and Kentucky) have dropped it, which helps low-price, high-volume SaaS.
• Physical nexus still counts too — an employee, office or contractor working in a state can create nexus regardless of sales.

Is SaaS taxable?

It depends entirely on the state. Roughly half the states with a sales tax tax SaaS in some form in 2026, and the rules differ in detail:

B2B vs B2C, bundled services, and where the customer’s users are located can all change the answer — check each state’s rules before relying on this summary.

California taxes SaaS from 2027

Does this apply to an Indian company?

• If you sell through a US company (a Delaware C-Corp or LLC), it is a US seller like any other and the rules apply fully. See US company registration.
• If the Indian company invoices US customers directly, states’ economic-nexus rules are written to cover remote sellers wherever located. Enforcement against foreign sellers is less common, but enterprise customers increasingly ask vendors about sales tax registration, and liability can accrue quietly.
• Selling through app stores or marketplaces? Most states make the marketplace facilitator collect and remit tax on sales it processes.

How to comply

1. Map revenue by state from your billing system — using customer billing or service addresses.
2. Identify states where you have nexus (economic or physical) and where your product is taxable.
3. Register for a sales tax permit in those states before collecting tax.
4. Configure billing — a sales-tax calculation tool connected to your billing platform.
5. Collect exemption certificates from exempt customers where applicable.
6. File returns on each state’s schedule (monthly, quarterly or annually).
7. Clean up the past — if you’ve had nexus for a while, voluntary disclosure agreements can limit look-back periods and penalties.

And the Indian GST side

US sales tax and Indian GST are separate. If your Indian company exports SaaS to US customers, the supply can qualify as a zero-rated export of services (typically under a Letter of Undertaking) when the conditions are met — see GST & tax advisory. If a US subsidiary sells to customers and pays the Indian parent for development, that intercompany charge is an export of services by the parent and needs arm’s-length pricing — see US subsidiary of an Indian company.

Frequently asked questions

Please note: this guide is general information based on the rules as they stood on the review date above. Regulations and RBI/CBDT procedures change often — please get advice on your specific facts before acting.