Bellevue, WA (October 2026) – State-level taxation of business technology purchases is shifting fast — and rarely in the taxpayer’s favor. More states are expanding sales and use taxes to reach software, SaaS, cloud platforms, and other digital services.

California and Colorado are ending their favorable software taxation tied to physical delivery location. Similar to what Washington state enacted in 2025, both states will apply sales and use taxes – for the first time – to digital products, including remotely accessed internet software and software-as-a-service (SaaS).

“According to Techerati, cloud expenditures now account for a third of total enterprise IT budgets. Public cloud-user spending could reach $1 trillion by 2030,” said Dan Berg, president of CPRS, the experts in corporate tax audits. “These new taxes can quickly offset any hard-earned IT budget increases.”

With more states taxing more categories of technology spend, these new tax obligations add budget pressure for enterprise IT leaders, making it more important than ever to recover every exemption, credit, and refund available. But the taxes are not always applied evenly, say the corporate tax experts at CPRS.

“Tax treatment for technology and digital products varies significantly by state and jurisdiction,” says Jeff Heyel, CMI, CPA, Vice President of Tax for CPRS. “For any business using software and SaaS across multiple locations, there’s a strong likelihood that tax is not being applied consistently — or correctly — which can lead to overpayments.”

Often, corporations either collect and remit software taxes at their home state rate or rely on tax automation software. “State and local tax rules evolve quickly, and nuances in interpretation — especially around exemptions and use-based rules — can still result in overpayment,” Heyel adds. “As new state taxes take effect and IT spending continues to rise, failing to catch these overpayments could be a multi-million dollar mistake — one made worse every year state legislatures add new technology taxes.”

The corporate tax experts at CPRS suggest conducting Reverse Sales and Use Tax Audits to protect IT budgets going forward, as tax rules continue to change. A reverse sales and use tax audit is the most direct way to offset these new costs — surfacing overpayments on past technology purchases so money can be returned to the business right as new taxes take effect.

“With the myriad of business taxes levied in most states, the question is not “Are you overpaying sales and use tax?,” it’s “By how much?,” Heyel concluded.