Article
Boost compliance and help reduce exposure by understanding AI SALT impacts
April 11, 2025 · Authored by Adam Cline, Kunaal Patel
When developing artificial intelligence (AI) software and operating in various jurisdictions, AI companies must pay close attention to state and local tax considerations to be compliant and reduce risk.
AI companies should be aware that generating revenue from inbound sales into jurisdictions outside the company’s home jurisdiction may have incremental state and local tax consequences for sales and use tax, income tax, franchise tax, and gross receipts tax. In addition, the presence of remote employees may create personal income tax withholding and payroll tax issues.
The classification of AI services — whether as tangible personal property or a service — can significantly impact tax obligations.
Because AI companies may deliver products and services through multiple mediums, the consequences can be complicated. Constant changes in state and local taxation mean AI companies need to carefully consider tax implications.
AI companies must remain vigilant in understanding the multifaceted tax landscape that affects their operations. By proactively assessing their tax obligations across various jurisdictions, they can mitigate risks and maintain compliance in an evolving regulatory environment. Staying informed about tax implications is crucial for sustainable growth and success.
AI companies: Navigating state and local tax considerations
As AI companies expand their reach beyond their home jurisdictions, they must navigate a complex landscape of state and local tax implications. Revenue generated from sales in various jurisdictions can trigger obligations for sales and use tax, income tax, franchise tax, and gross receipts tax.
Additionally, the presence of remote employees can complicate payroll tax responsibilities.
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The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.