Tax Treatment of Embedded Analytics Providers: State Sales Tax Guide

2025-11-21

If you sell embedded analytics instead of a visible, standalone dashboard, you sit in a weird tax spot. You are not a classic SaaS app. You are not pure custom software. You are not simple data processing. States are trying to force you into old buckets that do not quite fit.

That mix makes embedded analytics one of the more confusing areas for sales tax, sourcing, and resale exemptions.

If you are trying to grow an embedded analytics or “analytics as infrastructure” product without tax slowing you down, Afternoon’s bookkeeping and tax services can help you track revenue by state, manage resale certificates, and stay ready for audits.

This article is general information, not tax or legal advice. Always confirm your specific facts with a qualified tax advisor.

Quick facts

For most embedded analytics providers selling B2B into the U.S.:

Topic	Typical treatment today	What to watch
Core classification	Often SaaS, information services, or data processing	Depends on how you deliver (API vs full UI, multi-tenant vs dedicated)
Resale exemption	Allowed in some states if your customer resells analytics to end users	Texas and Washington sometimes yes, New York and Massachusetts usually no
Sourcing of tax	Usually based on customer location	Some states and cities look at end user location for “ultimate consumption”
Local cloud taxes	Certain cities add their own tech taxes on top of state rules	City of Chicago’s lease transaction tax and similar “cloud” rules
Multi-tenant vs dedicated	Multi-tenant looks like SaaS, dedicated can look like managed services	Different categories can mean different rates or exemptions
White label deployments	End users never see your brand	Resale certificates and contract language become more important
Main audit issues	Resale certificates, sourcing, mixed bundle pricing, and weak documentation	Architecture diagrams and contract terms often decide the outcome

What makes embedded analytics different

Traditional BI is simple for tax. A customer buys a license or subscription to a named tool, uses that tool directly, and pays tax if the state taxes software or SaaS.

Embedded analytics breaks that pattern.

Your customer’s users never see your logo or login page
Charts and metrics show up inside your customer’s own app
You feel more like infrastructure than a standalone product

That invisibility matters.

States still see you selling a service or software access to your direct customer. Your customer may then charge their users for a bundle that includes your analytics. The line between “reselling your service” and “using it internally” gets blurry fast.

That is where resale certificates, sourcing rules, and classification fights begin.

The resale certificate question

Here is the core question most embedded providers ask:

Can my customer buy my embedded analytics service for resale and give me a resale certificate?

If yes, your customer may not pay sales tax on your invoice. They would charge tax, when needed, on what they sell to end users. If no, your sale to them is taxable even if they roll your analytics into a taxable product they sell downstream.

States that sometimes allow resale treatment

In some states, if your customer:

Builds your analytics into a taxable SaaS or digital service, and
Charges their own customers for that feature,

they may be able to give you a resale certificate or reseller permit.

This is more plausible where:

The state allows resale of services or digital products in some cases
The upstream and downstream services are the same type of taxable service

For embedded analytics, you usually see this when:

You bill your customer based on their tenants or traffic
They charge their customers extra for “analytics” or “advanced reporting”
Both contracts treat analytics as a real, priced feature, not a free add on

If you accept resale certificates you should:

Confirm that the state allows resale for the type of service you sell
Check that the certificate is valid and current
Keep proof that your customer actually resells analytics as part of their product

States that usually do not allow resale

Other states are tighter.

They see you as providing a service to your direct customer. They do not care that downstream users benefit. They treat most SaaS, analytics, and information services as business inputs, not inventory for resale.

In those states, your customer usually cannot use a resale certificate to avoid tax on your invoice, even if they bundle analytics into a product they sell.

For embedded providers that means two customers can have the same deal on paper but totally different tax results depending on state rules on service resale.

Infrastructure vs service

States also care about how they view your core product.

Are you:

Selling infrastructure, like a hosted analytics platform or data warehouse, or
Selling an analytics service, like reports, dashboards, and insights?

Infrastructure style treatment

When states see you as infrastructure, they often use existing buckets such as:

SaaS or remote access to prewritten software
Digital automated services or electronic information services
Data processing or cloud computing services

In that view, your product is:

A technical platform that developers integrate
Configured and maintained mainly by engineering teams
Billed per tenant, per environment, or per usage unit

Service style treatment

In other situations, states focus on the output.

You may:

Deliver reports, dashboards, or insights
Have staff who help design metrics, models, or visuals
Work mostly with business users, not developers

That can push you into:

Information services
Professional or consulting services
Custom software development

Some of these categories are taxable. Others are not. The line often depends on:

How standardized your product is
How much human work you do per customer
How your marketing and contracts describe the work

White label and “invisible” deployments

White label embedded analytics adds another twist.

Your service is:

Hidden behind your customer’s brand
Covered by their terms of service
Billed under their product name

This matters for two big topics.

For sourcing, many states still look at where your direct customer is located or uses the service. Some have started to care about where end users sit instead.

For resale, your customer may argue they are reselling analytics. The state may say they are just using your analytics as part of their own service, which keeps your sale taxable.

Several state rulings on cloud and software have started to tie tax and sourcing to the location of the ultimate user instead of only the first buyer. Embedded analytics fits neatly into that debate.

API vs full stack embedding

How you deliver analytics affects how states classify you.

API only delivery

If you only provide APIs:

Developers send data and requests
You return metrics, aggregates, or chart ready data
Your customer draws their own UI on top

This often looks like:

Data processing or information services
Usage based pricing by calls, rows, or compute units
Less obvious “software access,” more automated transformation

In states that tax data processing or electronic information services, API only analytics can fall squarely into those taxable buckets.

Full stack embedding

If you provide:

Iframes or JavaScript widgets
Complete dashboards your customer drops into their app
White labeled interfaces that you host end to end

This looks more like:

Remote access to prewritten software, which reads as SaaS
Licensed embedded software in some structures
A subscription with possible overage fees

Some agencies also distinguish between complete applications and narrow components. That split affects whether they see you as a software provider or as a pure data processor.

Multi tenant vs dedicated instances

Your infrastructure model shows up in tax classification too.

Multi tenant

Most embedded analytics platforms are multi tenant.

Shared infrastructure
Logical separation by tenant or org ID
Standard feature set and release cadence

States usually treat this like classic SaaS or cloud access. Where SaaS or digital automated services are taxable, multi tenant embedded analytics tends to be taxable as well.

Dedicated instances

Large customers sometimes get:

Dedicated clusters or VPCs
Single tenant environments
A heavier managed service layer

States may see that as:

Licensed software in a managed environment
Infrastructure or platform as a service
A hybrid of SaaS and managed IT services

Some states and cities also have special rules for:

Nonpossessory computer leases
Database access
Cloud infrastructure

Embedded analytics that looks like a dedicated environment can get pulled into different tax rules than your multi tenant plans.

State by state flavor

Here is a simplified view for embedded analytics. Your exact treatment depends on your contracts, billing, and product design.

California

Statewide, remote access software and SaaS are usually not subject to sales tax if no tangible item is delivered.
Digital only analytics platforms and embedded tools often land as non taxable services for sales tax.
You still track sales for economic nexus and local registration, and you still care about local business taxes.

Key reference: CDTFA Publication 109 – Internet Sales.

New York

New York taxes prewritten computer software whether it is on a disk, downloaded, or accessed remotely.
Many analytics and BI tools are treated as taxable software or information services.
White label embedded analytics is still viewed as a service to your direct customer, not a resale to their users.

Key references:

Texas

Texas often classifies analytics, reporting, and similar platforms as taxable data processing or information services.
A portion of data processing charges is excluded from tax, but most of the charge is still taxable.
Resale arguments may work when your customer resells a similar taxable service, but you need strong contracts and facts.

Key reference: Texas Comptroller – Data Processing Services are Taxable.

Illinois and Chicago

At the Illinois state level, many SaaS and digital services are not subject to standard sales tax.
The City of Chicago applies a separate lease transaction tax to many cloud and database access services.
Embedded analytics used by customers in Chicago can trigger this local tax even when state sales tax does not apply.

Key reference: City of Chicago – Personal Property Lease Transaction Tax.

Washington State

Washington taxes many software and cloud offerings as digital automated services or remote access software.
It also applies a business and occupation tax on gross receipts.
Embedded analytics, API based or full UI, often fits the digital automated services rules, so both sales tax and B and O tax can matter.

Key references:

Pennsylvania

Pennsylvania has moved toward taxing remote access to canned software and some cloud computing.
The state often looks at where users are located, not just where the customer is billed.
For embedded analytics, that raises sourcing questions when your customer’s users are spread across many states.

Key reference: Pennsylvania SUT-12-001 – Cloud Computing and Software Access.

Because guidance changes, you should revisit these assumptions regularly with your tax advisor.

Talk to a sales tax expert

Get guidance tailored to your business

Documentation and compliance

Embedded analytics providers have a higher explanation burden. Many auditors will not understand your product on the first read.

Good documents make life easier.

Customer agreements

Contracts should state:

Who the end users are
Whether your service is embedded into a product your customer sells
Which party is responsible for charging and remitting tax to end users
Any territory limits or data residency rules

Clean language makes it easier to defend resale positions, sourcing, and classification.

Resale certificates

If you accept resale certificates:

Check that each certificate is complete and valid for that state
Confirm the certificate covers the type of service you sell
Link each certificate to specific customers and SKUs in your billing system
Keep them up to date and in one place for audits

You want to be able to pull a full list by state in a few clicks.

Usage and sourcing data

Even if you bill per seat, usage data matters.

Track:

Your direct customer locations
Any data you have on where their users sit, if you collect it
Where traffic originates for API calls and embedded views
How you map usage to taxable locations

If a state questions your sourcing method, this is what you will lean on.

Audit preparation for embedded analytics

When a state looks at your business it will ask:

What do you actually sell?
Who do you sell it to?
Where are those customers and users?
How did you decide what to tax and where?

You do not want to invent that story under audit pressure.

Build a simple audit kit:

A high level architecture diagram showing how data moves and where analytics runs
One or two anonymized customer examples that show how embedding works
Copies of your standard contract and a sample invoice for an embedded customer
A short memo that explains your tax positions, sourcing method, and resale policy
Notes on how you validate and store resale certificates

You will adjust this for each state, but the core package should already exist.

Future considerations

Embedded infrastructure is becoming common. States are catching up.

Over the next few years you should expect:

New guidance aimed at embedded and white label services, not just obvious SaaS
Tighter rules on which services qualify for resale and which are business inputs
More states tying tax and sourcing to where the ultimate user sits
Possible multi state frameworks for digital services and cloud taxes that touch embedded analytics too

You cannot predict every rule change. You can be consistent.

Pick defensible classifications. Apply them the same way across customers and states. Write down your reasoning so it does not live only in someone’s head.

How Afternoon.co can help

Afternoon works with analytics and infrastructure vendors that:

Sell embedded charts, dashboards, and APIs into other SaaS products
Run a mix of multi tenant and dedicated setups
Receive a steady stream of resale certificates, tax questions, and nexus notices

We help you:

Map revenue by state, city, and product type
Keep clean records for resale certificates and sourcing decisions
Coordinate with sales tax specialists so billing, contracts, and returns all line up

If you are building embedded analytics and want tax to be a known variable instead of a surprise, talk to Afternoon.