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New Jersey SaaS It IaaS Going to PaaS on Imposing Sales Tax on Cloud Computing

By David Pope and Prentiss Willson

The New Jersey Division of Taxation concluded in a technical bulletin that sales of cloud computing s

July 24, 2013

By David Pope and Prentiss Willson

The New Jersey Division of Taxation concluded in a technical bulletin that sales of cloud computing services are not subject to sales and use tax in New Jersey. Although this is not a change to the Division’s position, the bulletin specifically identifies software as a service (SaaS), platform as a service (PaaS), and infrastructure as a service (IaaS) as non-taxable cloud computing services. The Division explained that SaaS retailers provide customers with access to software through remote means; PaaS retailers provide customers with computing platforms through remote means; and IaaS retailers provide customers with equipment and services necessary to support and manage the customer’s content and dataflow through remote means. While New Jersey generally defines taxable tangible personal property to include prewritten software delivered electronically, the Division stated that SaaS, PaaS, and IaaS do not fit within New Jersey’s definition of tangible personal property because the retailer does not transfer any software to its customers. The Division further stated that New Jersey does not enumerate SaaS, PaaS, or IaaS as taxable services. New Jersey Division of Taxation Technical Bulletin TB-72 (July 3, 2013).

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