The North Carolina Department of Revenue issued a private letter ruling, concluding that subscription fees for a Software as a Service (SaaS) product are non-taxable. The taxpayer licenses a cloud-based SaaS platform for customer engagement and marketing, which customers access via the Internet. The taxpayer charges customers a subscription fee for monthly access. The Department states within the ruling, that the state “does not currently impose sales and use tax on revenue from access to cloud based software accessed electronically via an internet connection.” Because “the subscription fees do not provide Taxpayer’s customers the right to download, copy, or modify the software, and the software is not transferred to the customers[,]” the Department concluded that the fees were not subject to sales and use tax.
