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Year-end SaaS sales tax review: 2021

Anrok reviews highlights of 2021 tax legislation, decisions and cases impacting companies in the digital economy.

Anrok | Streamlined sales tax for SaaS

While the pandemic dominated the 2021 news for the second year in a row, tax developments still plowed ahead. The burden of sales tax only increased for companies as states look for ways to fill their coffers.

The bottom line

  • 2021 by the numbers, an overview of the US sales tax statistics
  • States prepare for 2022 legislative sessions with an eye on increasing revenue

Read on for the Anrok roundup of 2021 state sales tax developments that impacted companies in the digital economy, and what to expect as we head into 2022.

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Table of contents

Line items

Economic nexus for all

Economic nexus took hold in the last few holdout states, making it the law of the land. In 2021 the last three states to adopt economic nexus standards - Florida, Kansas, and Missouri - succumbed to enacting economic nexus laws of their own. With economic nexus standards differing by state, from the lowest of $100,000 in gross sales (e.g. Arizona) to the higher standards of $500,000 of sales and 100 transactions (e.g. New York), tracking economic nexus by state remains a burdensome challenge for companies.

Complexities for digital services impact all companies

The federal class-action lawsuit filed against Peloton highlighted challenges faced by companies in the digital goods and services space. The Peloton case is a prime example of what can happen to a company that doesn’t take the time and diligence to properly classify its products in the context of state tax codes. And unfortunately, sales tax classifications for an internet business are particularly tricky, with states struggling to identify, classify and clearly define the products in the digital space. The result is businesses also must make decisions on how to classify their products with limited or unclear guidance. Read more about this case and how Anrok can help companies get tax right the first time here.

Maryland enacts sweeping digital legislation

As far as sales tax legislation goes, 2021 for Maryland was as dramatic as it gets. In March of 2020, Maryland lawmakers passed House Bill 932 the “21st Century Economy Fairness Act” expanding the state’s sales tax to apply to certain “digital products”. The bill was vetoed by the Governor shortly after but was resurrected in February 2021, when the Maryland legislature voted to override the veto.

In March of 2021, the Maryland Comptroller issued guidance on interpreting the legislation, surprising everyone in the tax community by taking what appeared to be a standard expansion of the state’s sales tax to include “digital products'' and layering on an unprecedented broad interpretation of what a digital product includes. Immediate pushback from the business community ensued, resulting in the Comptroller receding and reissuing its guidance in June of 2021. As part of the guidance, Maryland clarified that SaaS is a taxable digital product. Read more about the dramatic Maryland events here.

2021 by the numbers

Sales taxes make up approximately 1/3rd of most states’ tax revenue. Often overlooked sometimes are the sheer volume of sales tax rates and local taxing jurisdictions that must be accounted for in the US sales tax system. Here are some sales tax statistics highlighting the ever-changing landscape of sales tax regimes:

  • The US has over 11,000 sales taxing jurisdictions. In 2021, over 150 new local taxing jurisdictions were created.
  • Each of those 11,000 plus jurisdictions has unique sales tax rates to track. In 2021, over 200 local tax rate changes occurred
  • While final 2021 numbers are yet to be reported, with final 2021 returns just being filed this week, estimates indicate that states will have collected over $450 billion in sales tax revenue for the 2021 tax year.


As governments look for growth opportunities out of the pandemic, and legislatures reconvene this month, compliance is evolving and increasingly important. Results of the state’s 2021 studies on sales tax expansion models we discussed in an earlier update will be presented to 2022 legislative sessions, and legislation will begin to be formed based on the results.

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Anrok | Streamlined sales tax for SaaS

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