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As tax laws evolve, some Wodify customers are required to pay sales tax on their software subscription and hardware purchases. Understanding when and why tax is added to your invoice helps you avoid surprises and keep your business financials accurate.

Pre-requisite Pro-Tip

There are no settings you need to change in Wodify for sales tax to be added to your subscription invoices. If Wodify is required to collect sales tax in your state, it will be added automatically.

However, your own business’ tax obligations may be different. For any questions about whether your business should be collecting sales tax from your members, please consult your tax professional. This article only explains Wodify’s obligation to collect sales tax on our products and services.

Step-By-Step How To

Understand why Wodify charges sales tax

1. In 2018, the U.S. Supreme Court case South Dakota v. Wayfair changed how states can require businesses to collect sales tax.

2. As a result, states can now require businesses to collect and remit sales tax even if the business does not have a physical presence in the state.

3. Instead of “physical presence,” many states use an economic nexus standard.

   • Economic nexus is based on economic activity in a state (for example, annual taxable sales or number of transactions).

4. If Wodify has an economic nexus in your state and software-as-a-service (SaaS) is taxable in that state, we are required to collect and remit sales tax on your Wodify subscription and, in some cases, hardware purchases.

Because of this, sales tax may appear as a separate line item on your monthly Wodify invoices.

Check if sales tax applies to your Wodify subscription & hardware

Sales tax will be added to your monthly Wodify subscription invoice if your place of business is located in a state where:

• Wodify has an economic nexus, and

• Wodify’s software services are taxable.

We are currently required to collect sales tax on subscriptions in the following states:

• AZ, CO - Aurora, CT, HI, KY, LA, MD, MA, OH, PA, PR, RI, SC, SD, TN, TX, UT, WA, WV

We are also required to collect sales tax on hardware products in the following states:

• CA, CO, FL, MN, NJ, NV

Note: Sales tax rates vary by state (and sometimes by locality). Your exact sales tax percentage will appear directly on your Wodify invoice. You can also calculate your estimated percentage using your state or local tax resources (or the calculator linked in your original Wodify communications).

Review sales tax on your Wodify invoices

To see how sales tax appears on your Wodify subscription invoice:

1. Open your monthly Wodify subscription invoice in your billing or account portal (where you normally view Wodify charges).

2. Look for a separate line item labeled something like “Sales Tax” or similar.

3. Confirm:

   • The tax amount

   • The tax rate (percentage) applied

   • Which state or jurisdiction is being taxed, based on your business location

If you believe your tax rate is incorrect or have questions about how it’s calculated, you can:

• Compare it to your state’s published sales tax rates, and

• Speak with your tax professional for guidance specific to your situation.

FAQs

Why am I being charged sales tax on my monthly Wodify subscription invoice?
In South Dakota v. Wayfair (2018), the Supreme Court ruled that states can require businesses to collect and remit sales tax even if they don’t have a physical presence in that state.

If Wodify has an economic nexus in your state and SaaS is taxable there, we are required to collect and remit sales tax for our activity. To do this, we must add sales tax as a line item to your monthly subscription invoices.

Why has Wodify never charged me sales tax before?
Before the Wayfair decision, states generally needed a business to have a physical presence (like an office or employees) before requiring them to collect sales tax.

After the ruling, many states adopted economic nexus rules based on sales volume or number of transactions in the state. Wodify continually monitors its economic activity in each state to determine whether we meet these thresholds and are therefore required to collect sales tax there. If that threshold is met and our services are taxable, we begin collecting sales tax.

What is an economic nexus? Can you give an example?
Economic nexus is a sales tax obligation based on economic activity, not physical presence.

Examples of activity that may trigger economic nexus include:

• Reaching a certain amount of annual taxable sales in a state

• Exceeding a state’s threshold for number of transactions

Each state can set its own standards and thresholds, so the exact criteria vary from state to state.

How much sales tax will I be charged?
If your business is located in a state where Wodify must collect sales tax:

• Sales tax will be added to your monthly subscription invoice, and

• Your exact percentage will appear as a line item on that invoice.

Because sales tax rates differ by state (and sometimes by city or county), Wodify cannot provide one flat rate for all customers. You can compare your invoice rate to your state’s official tax rate resources or use the tax calculator linked in your original Wodify notification.

Does this mean my business also needs to collect sales tax from my customers?
Not necessarily. This article only explains Wodify’s obligation to collect sales tax on our SaaS subscription and hardware.

Your own business’s requirement to collect sales tax from your clients depends on many factors (location, services offered, sales volume, etc.). For guidance on whether you must collect sales tax, please speak with your tax professional or accountant.

My state isn’t listed. Will I be charged sales tax in the future?
Possibly. Wodify only charges sales tax where:

1. Our software services are subject to tax, and

2. We have established an economic nexus in that state.

If both conditions become true for your state in the future, we will begin adding sales tax to your invoices, and you will be notified via email before that change appears on your bill.

Is Wodify benefiting from this?
No. Implementing sales tax collection actually costs Wodify money in administrative time and increased operating costs.

100% of the sales tax collected from you is remitted directly to the state. Wodify does not keep any portion of the tax.