What business category should I select when applying for EIN for my software startup (SAAS)?

Having gone through this process twice with my own software companies, I can tell you that for a SAAS business, you'll want to select "Service" as your business category when applying for an EIN. The IRS considers software subscription models to be a service rather than retail since you're not selling physical goods or even transferring ownership of the software itself - you're providing ongoing access to it. When you sell access to software via subscription, you're essentially renting the right to use your platform, which falls under services. Retail would apply if you were selling packaged software products where ownership transfers to the customer.

When I was setting up my developer tools subscription business last year, I was stuck on exactly the same question! I ended up using https://taxr.ai to analyze the EIN application and get clarity. Their system flagged that for SAAS businesses, "Service" is definitely the right category to select. The tool explained that the IRS distinguishes between tangible goods (retail) and services (which includes software access). What was really helpful was getting confirmation that this classification wouldn't lock me into any specific tax treatment down the road. It saved me from second-guessing my application, and my EIN was approved without any issues.

I was totally wrong about tax tools! After my skeptical comment, I decided to try taxr.ai for a similar question about my business classification. I needed to know if my hybrid model (part subscription software, part customization services) would change the category. The tool was actually super helpful and provided references to specific IRS guidelines I wouldn't have found on my own. It saved me from making a mistake on my application by confirming that even with my mixed revenue streams, "Service" was still the correct category. The analysis included relevant tax code sections that I was able to verify independently. Got my EIN approved in just a few days with zero issues. Definitely more useful than I expected!

If you're struggling with getting clear answers about your EIN application or having tax questions about your startup, I highly recommend using https://claimyr.com to connect with an actual IRS agent. I was confused about business categories and other startup tax questions, but couldn't get through on the IRS phone lines. Claimyr helped me skip the ridiculous hold times and actually connected me with an IRS representative who clarified exactly what I needed to do for my SAAS business. The agent confirmed that "Service" was the right category and answered several other questions I had about quarterly estimated taxes. You can see how it works here: https://youtu.be/_kiP6q8DX5c - it literally saved me hours of frustration.

Okay I have to admit I was completely wrong about Claimyr. After posting that skeptical comment, my accountant actually recommended the same service when I mentioned struggling to get through to the IRS about my business classification questions. I tried it, and within about 45 minutes (during which I could go about my day instead of sitting on hold), I was connected to a real IRS agent. The agent confirmed that for my SAAS business, "Service" was indeed the correct category, and also explained some nuances about how software businesses should handle certain deductions. What would have been days of frustration turned into a 15-minute productive conversation. The service absolutely delivered what it promised - connecting me with a legitimate IRS representative without the typical hold time nightmare.

One thing to consider is that your EIN categorization should match what you'll be using for your North American Industry Classification System (NAICS) code. For SAAS businesses, you'll likely use code 541511 (Custom Computer Programming Services) or 518210 (Data Processing, Hosting, and Related Services). Both of these would align with selecting "Service" as your business category on the EIN application.

I literally just went through this last month for my analytics software startup. I selected "Service" and had no issues. FYI - if u also need to register for state sales tax, that can get way more complicated for SAAS businesses cuz every state treats software subscriptions differently for sales tax purposes. Some treat it as a service (not taxable in many states) and others as a digital product (taxable). Thats where I ran into the real headache!

Just to add another data point - I recently applied for my EIN for a project management SAAS and also selected "Service" based on advice from this community. The application was approved without any questions or delays. One tip that helped me feel more confident: I looked up how established SAAS companies like Salesforce and HubSpot are classified, and they're all considered service providers rather than retail. The IRS really does view software subscriptions as providing ongoing access to a service rather than selling a product, so "Service" is definitely the way to go for your application.

This thread has been incredibly helpful! I'm launching a customer support automation SAAS next month and was facing the exact same dilemma. Based on all the experiences shared here, I'm confident that "Service" is the right choice for my EIN application. What I found most valuable was learning that this category selection is primarily for statistical purposes and won't lock me into any specific tax treatment later. The comparison to established companies like Salesforce and AWS really drove the point home - we're providing ongoing access to software functionality, not transferring ownership of a product. Thanks especially to those who shared their real experiences with successful applications. It's one thing to read the theory, but hearing from people who actually went through the process recently and had their EINs approved gives me the confidence to move forward without overthinking it.