Arizona Private Letter Resolution LR10-007 defines leased software and subscription software as taxable.
The activities of companies that provide software as a service (SaaS) are not explicitly defined in the Arizona Administrative Code. However, the private letter ruling defines SaaS as a software delivery model in which a vendor hosts a software application and customers access it over a network (i.e., over the Internet using a web-based user interface). Customers do not own the license for the software and cannot fully download it to their device, but they do pay to use the software on a subscription basis. Read also: B2B SaaS marketing.
Private letter rulings depend on the taxpayer and cannot be used for another business in the case of an audit. If you sell software as a service in Arizona, you may need a ruling in a private letter to clarify whether your product is taxable in their state.