Published: January 29, 2020

IT and Sales Tax…Assisting the IT Department with its ROI


Staffing and IT are typically the largest administrative cost for companies.  Recent developments and innovations, like cloud computing and business process as a service (BPAS), are continuing to drive costs upward for most companies.   IT Departments are routinely asked to do more with less given this expansion in costs.   It’s not uncommon for companies to have a backlog of IT projects and part of this is due to the lack of budgets.

But there are ways to help….by reducing the sales tax, IT can increase its overall ROI.

Simultaneously to the IT growth spend, many states continue to evolve its taxation of IT type spend which has led to a lack of uniformity between how states define and apply sales tax to these transactions.   If you add in sourcing issues with items such as cloud computing and software / infrastructure as a service, many taxpayers struggle to determine if sales or use tax is due.  And oftentimes, overpay their sales and use tax liability.

By working closely with their IT departments, taxpayers can take a proactive approach to understanding the types of IT spend as well as the preferred vendors that support their IT infrastructure.  With a greater understanding of the various transactions, sales tax departments are able to understand the exemptions and be able to structure transactions to help minimize the overall sales tax.   Sales tax departments can also help IT negotiate contracts with some of those sourcing issues in mind to take advantage of states that offer favorable tax treatment.   Other planning tools such as shared service companies can also be utilized to achieve even greater savings.

In the end, a proactive environment with constant communication can return significant dividends.