AI as a Service — Divergent State Tax Approaches and Their Impact

01.22.26

In the race to embrace AI, many firms are missing a critical post-close compliance issue: state sales tax.

Winstead attorneys Josh Prywes and John Laughlin recently published an article in The Texas Lawbook examining how AI is taxed in Texas and Indiana. Their analysis highlights a widening jurisdictional divide that could impact your next transaction.

As of April 2025, Texas will implement an "ancillary test" treating AI as a taxable data-processing service, while Indiana has determined that generative AI is a non-taxable service. This divergence increases the risk of under-collection and penalties for multistate sellers.

To learn more, read the full article here. (subscription may be required).

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  1. Josh Prywes
  2. John Laughlin

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