Taxpayer Decisions

Requires Your Decision

Economic Nexus — AI Agent Activity

Whether activity by an AI agent operating on a business's behalf in a state creates economic nexus for that business is unsettled law. No state has issued guidance specific to autonomous agent commerce. Post-Wayfair thresholds ($100K or 200 transactions) may be triggered by agent activity, but whether agent-initiated transactions count toward those thresholds is unresolved.

VAT Scope — AI-to-AI Transactions (EU / UK)

EU and UK VAT rules for 'electronically supplied services' were drafted before autonomous AI commerce existed. Whether a transaction between two AI agents — with no direct human recipient — falls within or outside scope is an open legal question. Current EU/UK guidance presupposes a human consumer.

AI Agent Employment Classification

If a business operates an AI agent, is the agent software/property, a contractor (1099-NEC), or an employee (W-2, FICA)? No IRS or state guidance exists. The entire common law worker classification framework (Behavioral Control, Financial Control, Relationship of the Parties) presupposes a human worker. The engine assumes contractor treatment for 1099-NEC tracking purposes.

Nexus via Agent Network Participation

If agents on a shared platform (like the AgentTax Network) transact across states, does one agent's nexus create nexus for other agents on the same network? States could apply marketplace facilitator laws to argue shared platform equals shared nexus. The legal distinction between an 'agent network' and a 'marketplace' is fact-specific and unresolved.

Bundled Service Classification

A single AI transaction may include compute, research, and consulting work. States apply different bundling rules: True Object Test (classify by dominant purpose), pro-rata allocation, or all-or-nothing (taxable if any component is taxable). The engine currently accepts one work_type per transaction with no bundling logic. Some states apply a 5% de minimis rule where the entire transaction is taxable if the nontaxable component is less than 5%.

Engine Default with Advisory

Marketplace Facilitator Classification

47 jurisdictions (46 states + DC) have marketplace facilitator (MPF) laws that shift collection responsibility from the third-party seller to the facilitating platform. The engine accepts a marketplace_role input ('seller' | 'facilitator' | 'direct'). Whether a facilitated sale counts toward the SELLER's economic-nexus threshold is PER-STATE (MPF_THRESHOLD_RULES, 2026-08-10): verified include CA/TX/NY/WA/MI/WI/IA/NJ and default-include for most states; VA excludes by statute; IL and PA are conditional. recordStateRevenue keys on counts_toward_nexus_threshold — there is NO blanket exclusion. Collection responsibility (collected_by_marketplace) is settled for all 47 MPF jurisdictions and is a separate flag from threshold counting.

Classification of AI Agent Labor

No state has directly addressed the sales tax classification of AI agent output. Five plausible classifications exist: SaaS/digital service, data processing, information service, professional service, or digital good. Classification determines taxability — most consequentially in CT (data processing 1% vs. information service 6.35%). In NJ, information_service is taxable at 6.625%, but SaaS and data_processing are NOT taxable (TB-72; data processing is not an enumerated service under N.J.S.A. 54:32B-3(b) — flipped exempt 2026-08 gauntlet) and professional services are exempt.

SaaS vs. Information Service Classification

NJ does NOT tax SaaS (TB-72, July 2013) — SaaS access is not a transfer of tangible personal property under the N.J.S.A. 54:32B-2(g) definition, and use of a software application is not an enumerated service. (N.J.S.A. 54:32B-8.56 is the separate business-use exemption for electronically delivered prewritten software — a download rule, not the SaaS basis.) NJ taxes information_service at 6.625% (§54:32B-2(yy)) and exempts professional services. The critical NJ distinction is whether the product is SaaS access (exempt) or information_service (taxable, e.g., Westlaw/LexisNexis database-access products). TAM 2013-10 applies only to downloadable prewritten software, not SaaS access. In most other states, SaaS and information_service are treated similarly. Engine uses work_type to determine economic category and applies state-specific rules.

True Object Test Application

Many states apply the True Object Test to determine what a buyer is really purchasing. For AI transactions, this creates ambiguity: is the buyer purchasing software access (SaaS) or the information/output it produces? Delivery mechanism (software) and output (information/service) can point to different classifications.

Sourcing Rules — Destination vs. Origin-Based

Different states apply different sourcing rules. Most use destination-based sourcing (buyer's location) for everything. TX, UT, AZ, and TN apply blanket origin-based sourcing for intrastate transactions (seller's location determines the local rate; set re-verified against primary law 2026-08-12). Ohio applies CATEGORY-SCOPED origin sourcing: R.C. 5739.033(B)(1) sources intrastate retail sales — excluding lease or rental — of tangible personal property (including prewritten computer software, R.C. 5739.01(WW)) or digital goods (specified digital products, R.C. 5739.01(OOO)/(B)(12)) to the vendor's order-receipt location, subject to conditions (B)(1)(a)-(c); every taxable Ohio SERVICE, including automatic data processing and electronic information services (most AgentTax categories), is destination-sourced under 5739.033(C) even intrastate, and data purchases are electronic information services under 5739.01(Y)(1)(c)(i), not digital goods. For interstate transactions, destination sourcing applies everywhere.

AI Agent Resale Certificates

When an AI agent purchases compute or data to resell as processed output, should it present a resale certificate? Resale certificate law is settled for human commerce, but whether an AI agent can hold and present certificates is unaddressed. The engine supports exemption objects but does not validate resale appropriateness or track multi-tier supply chains.

Chained Agent Tax Pyramiding

In multi-agent pipelines (Agent A → Agent B → Agent C), each stage may be taxed independently. Without B2B exemptions or resale certificates, a 6% rate compounds across tiers — a 3-tier chain at 6% per stage results in approximately 19% effective cumulative tax, not the intended 6%. The engine treats each transaction in isolation with no pipeline awareness.

Cryptocurrency Payment Tax Treatment

Federal treatment of cryptocurrency as property is settled (IRS Notice 2014-21, Rev. Rul. 2023-14). Using USDC to purchase a service is a disposition of property, triggering gain/loss recognition on the USDC for the buyer. For USDC (a stablecoin pegged to $1), the gain/loss is typically de minimis. State-level implications vary — NY's BitLicense and state-specific crypto regulations add complexity.

Digital Advertising and Targeted Advertising Taxes (MD, IL, UT; PA pending)

Maryland imposes a gross receipts tax on digital advertising services (HB 732). Its validity is contested and it has never been sustained on the merits: in Comptroller v. Comcast of California (Supreme Court of Maryland, per curiam order filed 2023-05-09) the court vacated the Anne Arundel County Circuit Court orders against the tax because the taxpayers had not exhausted administrative remedies, without reaching the merits. On 2026-08-14 the Maryland Tax Court held the tax invalid in three companion cases (Apple, Google, Peacock TV) under the Internet Tax Freedom Act, the dormant Commerce Clause and the Due Process Clause, and ordered refunds; the State petitioned the Anne Arundel County Circuit Court for review by 2026-09-15. Until that review resolves, Maryland's DAT is a watch item, not settled law. Rates are tiered by global annual gross revenues: 2.5% ($100M-$1B), 5% ($1B-$5B), 7.5% ($5B-$15B), 10% ($15B+). This is separate from sales tax. Most AgentTax users will not meet the $100M global revenue threshold. If an AI agent provides ad targeting or marketing analysis in MD, this tax may apply in addition to sales tax. As of 2026, Maryland is no longer alone: Illinois SB 3019 enacts a 10% Targeted Advertising Services Tax on providers with $1M+ in Illinois receipts, and Utah SB 287 (signed 2026-03-25, Utah Code 59-35) imposes an annual tax at the state sales tax rate (reported as 4.85%) on 'targeted advertising entities' meeting all three of: $1M+ Utah targeted-advertising receipts, $100M+ worldwide targeted-advertising receipts, and targeted advertising at 50%+ of total gross receipts. Utah's base is a three-part conduct test (sale of ad space through a bidding process; individualized data profiles used for delivery; an interface letting the viewer access information or make a purchase) and is apportioned by the ratio of Utah impressions to total impressions. Both take effect 2027-01-01. Pennsylvania HB 1678 (5% gross receipts) passed the House 139-63 on 2026-06-10 and is not enacted. All three face Internet Tax Freedom Act and Commerce Clause exposure on the Maryland template; none is a live collection obligation before 2027-01-01.

Subscription vs. Transaction Pricing Tax Treatment

Some states treat recurring SaaS subscriptions differently from per-transaction API fees. The engine has no billing model flag — all transactions are treated as per-event. In most states, the treatment is identical, but specific states (notably NY) may apply different rules to subscription vs. metered pricing models.

Telecommunications Tax on API Calls

Some states impose communications taxes on data transmission. An API call could theoretically be classified as data transmission rather than a digital service. However, API calls are application-layer HTTP requests, not telecommunications transmissions. No state has successfully classified web API calls as telecommunications. The Chicago PPLTT (already handled by the engine) is the closest analog.

Professional Service Exemption — State Variations

In US states with closed-enumeration service-tax statutes (~40 states), services not specifically enumerated as taxable are exempt — professional services are exempt by default. In broad-base gross-receipts/GET states (HI, NM, SD, WV), professional services ARE taxable. CT taxes specific enumerated professional categories at 6.35%: business management (§12-407(a)(37)(I)), business analysis (§12-407(a)(37)(J)), and public relations (§12-407(a)(37)(BB)). TX §151.0101 is a closed list; management consulting is not enumerated and is exempt (Comptroller Pub. 96-259). Engine routes the consulting work_type to the digital_service economic_category, NOT to professional_service (WORK_TYPES in api/_lib/tax-engine/work-types.js, changed 2026-04-21 and re-verified live 2026-09-11) - an AI agent performing advisory work has no licensed practitioner behind it, so it does not claim the closed-enumeration professional-service exemption; 34 Tex. Admin. Code Sec. 3.330(a)(1)(C)(iv) and its (b)(3)/(b)(4) examples, read direct 2026-09-11, are the first primary text supporting that routing in a state's own words. The professional_service matrix cells below therefore govern human professional services, not agent consulting; TAXABILITY_MATRIX encodes state-specific taxability with DEFAULT_CATEGORY_RULES as fallback (default: exempt).

Missouri 100% Capital Gains Deduction (2025 HB 594) — Individual Now, Entity on Rate Trigger

Missouri allows a 100% subtraction of income reported as a capital gain for federal income tax purposes by an INDIVIDUAL, for all tax years beginning on or after 2025-01-01 — Mo. Rev. Stat. 143.121.3(14)(a) (2025 HB 594; primary text read at revisor.mo.gov 2026-08-17). Because the hook is federal capital-gain reporting, short-term gains qualify as well. The WATCH is subdivision (14)(b): the subtraction extends to entities taxed under 143.071 only 'for all tax years beginning on or after January first of the tax year following the tax year in which the top rate of tax imposed pursuant to section 143.011 is equal to or less than four and one-half percent' — the trigger has not fired (each year's rate determination must be checked). Subdivision (15) separately adds a specie-gain (gold/silver) subtraction from TY2026. CITATION GUARD: 143.022 is the phased 20% BUSINESS-INCOME deduction and contains no capital-gains content — a 2026-08 citation sweep misread the deduction as nonexistent because it verified that wrong section; never cite 143.022 for the cap-gains rule.

Kentucky Data Processing as Prewritten Computer Software Access (KRS 139.200(2)(ax)) — API/AI True-Object Question

Adjudicated 2026-08-13 (panel D-KY-dp, 2-0 AFFIRM TAXABLE; supersedes the 2026-08-12 disclosed conservative hold). KY's closed enumeration (KRS 139.200(2)(a)-(ay)) has no data-processing entry, but (2)(ax) taxes 'prewritten computer software access services' — KRS 139.010(35) (numbering eff. 8/1/2026; the same definition was (34) for law in force 1/1/2023-7/31/2026 — 2026 Ky. Acts ch. 161 sec. 11 inserted a new (6), data brokering services): the right of access to prewritten software the seller or a third party possesses, taxable 'regardless of whether the charge for the access or use is on a per use, per user, per license, subscription, or some other basis.' The engine's modeled population — API-invoked, per-use-billed access to seller-hosted prewritten AI software — fits that definition (an API credential IS a right of access exercised on exactly the 'per use' basis the statute names), and KY DOR Kentucky Sales Tax Facts Winter 2025/2026 p.6 states that AI applications whose output adapts to user-furnished data are not custom software and remain taxable. The buyer-purchases-the-processed-OUTPUT counter-argument is unlitigated in Kentucky; the newsletter is informal guidance; no KY regulation, ruling, or case applies true-object analysis to API/AI facts. Never characterized as settled. Statutes read from the official LRC PDFs (ids 58185/58186, eff. 8/1/2026) 2026-08-17.

Kentucky Data Brokering Services Tax (KRS 139.200(2)(ay), eff. 2026-08-01) — Amount-Covered, Boundary Disclosed

2026 Ky. Acts ch. 161 (HB 757), effective 2026-08-01 and inside the engine's as_of window: KRS 139.200(2)(ay) taxes 'data brokering services', defined at KRS 139.010(6) as 'the act of collecting, aggregating, and analyzing personal data for sale to a third party while possession of the personal data is maintained by the person providing the data brokering services or by the third party, wherever located, regardless of whether the charge for the services provided is on a per use, per user, per license, subscription, or some other basis.' KRS 139.010(51)(b)2 excludes from 'use' prewritten computer software access services AND data brokering services purchased for use outside the state and transferred electronically outside the state for use thereafter solely outside the state. The levy does NOT reach the engine's data_processing category (panel D-KY-dp): the PERSONAL-data and sale-to-a-THIRD-PARTY elements are absent — processed output returns to the furnishing customer. Statute read from the official LRC PDFs 2026-08-17; independently re-read direct 2026-08-22 (panel D-ky-ay researcher seat, LRC ids 58185/58186, current codification 'Effective: August 1, 2026'). KY DOR Kentucky Sales Tax Facts, Summer 2026, p.3 (read direct 2026-08-22): providers must register and collect 6% from 8/1/2026; notes the KRS 139.310 use-tax companion and the KRS 139.470(6) GOVERNMENT-seller exemption (irrelevant to the modeled private-seller population); elaborates nothing on scope and defines nothing — 'personal data' remains undefined anywhere in KRS ch. 139.

Massachusetts Data Processing — 830 CMR 64H.1.3(9)(a) Exemption vs. Citrix Remote-Software-Use Recharacterization

Adjudicated 2026-08-13 (panel C-MA-dp): MA data_processing REMAINS TAXABLE at 6.25%, converted from the silent digitalTaxable fallback to an explicit disclosed conservative hold. MA is genuinely two-sided. EXEMPT side: 830 CMR 64H.1.3(9)(a) exempts charges for processing data furnished by customers 'regardless of the method of delivery', and its own exempt examples (ATM terminal driving, EFT, credit-card/check verification) are fully automated services — automation alone does not make a charge taxable; supported by (2), (8)(b), (9)(c) Ex. 1, (13)(a), and DOR Letter Ruling 12-8 (cloud computing, rev. 11/8/2013). TAXABLE side: (3)(a) taxes 'transfers of rights to use software installed on a remote server'; (14)(a)'s remote-use rule is 'generally' taxable with a CONJUNCTIVE object-of-the-transaction exception; (2) defines License as the right to use, copy, or ACCESS software regardless of server location; Citrix Systems, Inc. v. Commissioner of Revenue, 484 Mass. 87 (2020) (SJC, taxpayer loss, deference to DOR). No MA authority — statute, regulation, ruling, or case — addresses automated or AI processing. The comfort cap is Reasonable Basis: the (9)(a)-vs-Citrix line IS a true-object question and the registry true_object_test cap binds; the researcher's More-Likely-Than-Not merits assessment for the strict exempt pattern is RECORDED here but sits above the cap and cannot be adopted without the documented registry change process. Under house conservative-default policy a Reasonable-Basis exemption reserves at the higher outcome: collect and disclose. FABRICATION GUARD: 'Directive 13-3' and 'TIR 05-3' are fabricated citations (2026-08 sweep) — never cite them for MA SaaS/cloud positions; the real cloud ruling is Letter Ruling 12-8. Provenance: 830 CMR 64H.1.3 read direct 2026-08-17 (sec.state.ma.us); Citrix panel-verified (read in full by both C-MA tax members); LR 12-8 second independent read COMPLETE 2026-08-17 (verdict ma-storage-spinout-2026-08-17 — full text retrieved via reader-proxy of the live mass.gov page, three consistent fetches, cross-corroborated; rulings verbatim on file). Its storage holding is now IMPLEMENTED: the storage transaction_type is carved out EXEMPT via this cell's storage transaction_type_override (see ma_remote_storage_lr12_8); its rulings-1-2 holding is likewise IMPLEMENTED as of 2026-08-22 — cloud_infrastructure is carved out EXEMPT via its own sub-rule (panel A-ma-cloud; see ma_cloud_infrastructure_lr12_8). This hold now covers compute, api_access, and data_processing routing only.

Maine digital audiovisual/audio subscription tax (2026 expansion)

Effective 2026-01-01, Maine taxes digital audiovisual and digital audio services — streaming or subscription access with less than permanent use, including access conditioned on continued payment — at 5.5% (36 M.R.S. §1752(1-P)-(1-R) and (17-B), enacted by P.L. 2025, c. 388, Pt. G (LD 210); MRS Guidance/Instructional Bulletin 115, Oct. 17, 2025). SaaS is NOT in the expansion — remote software access stays exempt under MRS Rule 326 §9.3.B. Substantial Authority holds for the streaming/digital-AV core (statute text + published MRS bulletin, GIB 115 read at the 2026-08-21 verification). The ENGINE'S APPLICATION is deliberately broader than the certain core: every ME transaction typed 'subscription' takes the taxable leg because the engine cannot distinguish media-content subscriptions from software-access subscriptions without a content signal — a disclosed conservative hold (ME_DIGITAL_AV_SUBSCRIPTION advisory on every taxable result, which directs pure software-access subscriptions to transaction_type 'saas' for the exempt answer). Modeled as a subscription-keyed transaction_type_override on TAXABILITY_MATRIX.ME.digital_service, deliberately UNDATED with a pinned coupling: ME rides the 2026-01-01 default replay floor (exactly the effective date); if that floor ever moves lower the override must gain taxable_from 2026-01-01 in the same commit.

Massachusetts Remote Storage — Exempt per DOR Letter Ruling 12-8 Ruling 3 (Active Guidance)

Adjudicated 2026-08-17 (spin-out verdict ma-storage-spinout-2026-08-17 — second independent read of LR 12-8, full text retrieved and cross-corroborated, rulings verbatim on file): MA `storage` is EXEMPT, released from the dp conservative hold as a P1 overtax. DOR Letter Ruling 12-8 (Cloud Computing; original 7/16/2012, 'revoked in part and replaced' by the revision of 11/8/2013) ruling 3 holds verbatim: 'Sales of Remote Storage Service are not taxable when sold to customers in Massachusetts' — on facts (internet access, customer-retained ownership of stored content including applications and software, pricing by storage capacity used and data uploaded/downloaded) at least as tax-vulnerable as anything the engine's storage type describes. Ruling 3 is the ruling's cleanest holding: unlike ruling 2 it carries no 'under the facts presented' caveat, and the 2013 revision moved uniformly TOWARD exemption. ACTIVE guidance: served live at mass.gov as of 2026-08-17 with no revocation/modification/supersession found; under 830 CMR 62C.3.1, DOR public written statements remain effective until revoked, modified, or superseded. Structure concurs: MA taxes TPP (incl. prewritten software, (3)(a)) plus enumerated services and has NO enumerated tax on storage; 830 CMR 64H.1.3(14)(a)'s object-of-the-transaction exception and (14)(b)'s generally-not-taxable 'web site hosting' analog put pure storage on the nontaxable side, and LR 12-8's own CONCLUSION carves 'non-taxable computing resources or storage capacity (as opposed to acquiring the use of software).' Citrix, 484 Mass. 87 (2020) polices the OTHER side of that very line (functionality access) and does not reach capacity sales. Unlike the two-sided dp question (ma_data_processing_software_use, hold stands), storage is ONE-SIDED in the ND/ME/NJ class: no MA statute, regulation, ruling, or case taxes storage qua storage. RECORD CORRECTION (binding on all MA surfaces): 830 CMR 64H.1.3(9)(a) does NOT name storage — the NJ-contrast shorthand ('(9)(a) names the storage of data') is wrong for MA; the exemption runs through the enumerated-tax structure + (14)(a)/(14)(b) + LR 12-8 ruling 3, never through (9)(a). Never cite (9)(a) as the MA storage authority.

Massachusetts Cloud Infrastructure (IaaS) — Exempt per DOR Letter Ruling 12-8 Rulings 1-2 (Active Guidance)

Panel A-ma-cloud (2026-08-22, three seats, no genuine split — the follow-on adjudication the storage verdict expressly reserved): MA cloud_infrastructure computes EXEMPT via a cloud_infrastructure-keyed transaction_type_override on the MA data_processing cell. DOR Letter Ruling 12-8 (Cloud Computing, rev. 11/8/2013) ruling 1, verbatim and uncaveated: 'Sales of Cloud Computing products, including the various charges described above, which involve the customer's use of its own application software or open-source operating system software are not taxable when sold to customers in Massachusetts.' Ruling 2 extends to vendor-licensed third-party OS included incidentally at no separate charge, 'under the facts presented in this request.' Re-verified live three times 2026-08-22 (both legal seats + the mandatory pre-build re-read; no revocation/supersession; operative reg still the 10/20/06 promulgation). The 11/15/2024 rewrite draft is unadopted and dormant — ~21 months without entering the mandatory c. 30A notice-and-hearing channel while DOR ran that channel for four other regulations; continuing to collect 6.25% against the state's own published exemption on the strength of an unadopted draft is the knowing-error-adjacent posture the storage precedent condemned. BOUNDARY (advisory-disclosed, MA_CLOUD_INFRASTRUCTURE): exempt = capacity/VM/GPU/bare-metal, customer's own or open-source stack, or vendor OS incidental at no separate charge; managed-platform/PaaS/essential-or-separately-charged vendor software is Citrix-shaped → relabel saas/digital_service; processing-as-a-service stays on compute/api_access at the disclosed hold. Label-arbitrage residual accepted per storage precedent: disclosed boundary + the fired override named in every audit trail.

Where Experts Disagree

For AI transactions, does delivery mechanism (software) or output (information/service) control classification?

Is SaaS 'tangible personal property' for sales tax purposes?

Should B2B digital transactions be exempt from sales tax?