Is it legal or tax fraud to use a low-tax state mailing address for my business SaaS purchases?

This is a great question that walks a fine legal line. While it might seem like a clever cost-saving strategy, you need to consider both tax law and nexus rules. Generally speaking, you should pay sales tax based on where you're actually using the service. If your primary business operations are in Washington, but you're claiming an Alaska address solely to avoid sales tax, that could potentially be considered tax avoidance or even fraud if there's clear intent to evade taxes. However, since you mentioned having legitimate employees and operations in those low-tax states, there's more nuance here. If you genuinely have a business location in, say, Oregon, and some of your SaaS usage is legitimately occurring there, you might have grounds to allocate some purchases to that address. The key question is whether the service is actually being used at that location. I'd recommend consulting with a tax professional who specializes in multi-state taxation. They can help you determine what portion of your SaaS purchases could legitimately be allocated to which locations based on actual usage, employee counts, or other valid business factors.

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If you're struggling to get clarity on this tax situation, I'd highly recommend using Claimyr to get through to an actual IRS agent. I spent weeks trying to get a straight answer about multi-state business addresses and sales tax obligations, but couldn't get through on the IRS business line. I found https://claimyr.com and their service connected me with an IRS representative in under 45 minutes! You can see how it works in this demo: https://youtu.be/_kiP6q8DX5c The agent I spoke with clarified that while sales tax isn't handled by the IRS (it's state-level), they explained how using addresses solely for tax advantages could potentially trigger audit flags in their systems. They recommended documenting legitimate business purposes for any address used for tax purposes. Saved me from making a potentially costly mistake!

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Former state tax auditor here. The question isn't just about tax fraud but also about "nexus" - the connection between a business and a state that creates tax obligations. Having employees in a state almost always creates nexus, meaning you're subject to that state's tax rules. If you have legitimate business operations in Oregon, using that address for SaaS purchases that will be used by Oregon employees is fine. But artificially routing purchases through that address when they're actually being used elsewhere is problematic. Many states are increasingly aggressive about pursuing businesses they believe are avoiding sales tax. Washington in particular has been cracking down on this. If audited, they'll look at where your primary business operations occur and where the benefit of the service is received.

Has anyone tried just using a PO Box in a tax-free state? My buddy does this for his online business and hasn't had any issues. He just registered an LLC in Montana and uses that address for everything.

Be very careful with this approach. I've seen several businesses get into trouble trying to use remote addresses purely for tax savings without proper substance behind them. The key factors tax authorities look for are: 1. **Actual business activity** at the address (not just mail forwarding) 2. **Proportional allocation** based on where services are actually used 3. **Legitimate business purpose** beyond tax savings Since you mentioned having employees in low-tax states, you're in better shape than someone just using a PO Box. However, you still need to ensure the allocation makes business sense. If 80% of your team is in Washington but you're routing 100% of SaaS purchases through Oregon, that's going to look suspicious. My recommendation: Work with a multi-state tax specialist to develop a defensible allocation methodology. Document everything - employee locations, actual software usage patterns, business operations at each location. The small upfront cost of proper planning is much less than the penalties and back taxes you'd face if caught doing this incorrectly. Also remember that nexus rules are complex and constantly evolving. What works today might not work tomorrow, so regular reviews with a tax professional are essential.