Beginning July 1st, 2018, technology companies that sell software as a service are no longer required to collect sales tax.
In March of this year, Governor Holcomb signed Senate Bill 257 into law exempting transactions where the end user purchases, rents, leases, or licenses the right to remotely access prewritten computer software over the internet, over private or public networks, or through wireless media- more commonly referred to as software as a service (SaaS).
Prior to this bill, there was no official guidance for taxpayers. The Indiana Department of Revenue took the position that remotely accessed prewitten software was subject to the 7% sales tax when a customer gained constructive possession and the right to use, control and direct the use of the software by a user in Indiana.
Senate Bill 257 does not change the sales tax treatement of prewritten software transferred in a tangible medium or delivered by load and leave. Those items will still be subject to sales tax.
With the sigining of this bill, Indiana becomes one of four states to except SaaS from sales tax.
This law is effective only to transactions occurring after June 30, 2018 and is scheduled to expire July 1, 2024