Tax, education, broadband bills top legislative priorities for tech industry

January 5, 2018

Tech leaders are looking to Indiana lawmakers to make a change in tax law they say will encourage more cloud-based software firms to locate in the state—and they have the support of Gov. Eric Holcomb.

The governor has asked lawmakers to exempt what’s called software as a service—or SaaS—from Indiana’s 7 percent sales tax. The move would save money for nearly every company in the state and could bolster local firms that sell SaaS.

But that’s not the only tech-related legislation the General Assembly will consider this session. Proposals to require computer science education in high schools, create grants for broadband expansion, and authorize the testing and operation of autonomous vehicles are among bills introduced in the House and Senate.

The Indiana Chamber of Commerce is backing the effort to make computer science classes a high school graduation requirement for all Hoosier students

Caryl Auslander, the chamber’s vice president of education and workforce development, said the increasing number of tech jobs in the state makes science, technology, engineering and math even more important. But in particular, she said, all students should have exposure to computer science.

“Currently there is not a computer science requirement for graduation. We believe that needs to change,” Auslander said in a statement about the chamber agenda. “All students should have access to fully explore skills like this that are in demand.”

Holcomb has put the issue on his agenda as well, pushing to require that all schools offer computer science courses by 2021.

But not every Indiana community has access to the technology that allows students to take full advantage of such classes. That’s why Sen. Erin Houchin, R-Salem, has introduced Senate Bill 356, which authorizes the Indiana Office of Community and Rural Affairs to offer grants for projects that expand high-speed internet service in unserved areas of the state.

The bill has been assigned to the Senate Utilities Committee.

“Access to high-speed internet is critical for Hoosier families, students and businesses, and this technology is often taken for granted where services are easily accessible,” Houchin said.

The program would make communities and school districts eligible for grants from the existing Rural Economic Development Fund, which provides money for programs that enhance and develop rural communities.

“It is important that we give our communities the resources necessary to be successful,” Houchin said.

Holcomb is also pushing to make sure Indiana is preparing for what he calls “the next generation—or really the next evolution—of transportation.” That means asking lawmakers to authorize the testing and operation of autonomous vehicles on Indiana roads.

Rep. Ed Soliday, R-Valparaiso, will author the bill, which would create a four- to five-member task force that would consider autonomous-vehicle testing requests. Anyone who wants to test fully autonomous vehicles on public roads would have to obtain the task force’s approval. The rule would not apply to activities at test facilities.

Soliday brought together representatives from a variety of organizations, including automobile manufacturers, state agencies, the insurance industry, vehicle manufacturers, and tech firms like Uber, Lyft and Google. The group has met several times since last summer.

“We’re still taking input from folks,” he told IBJ.

But even with all those priorities, ClearObject CEO John McDonald said the software tax issue is the most important for the tech community this year. (That’s in part because lawmakers won’t consider a budget this year, which takes an expansion of the venture capital tax credit off the table.)

“We could become the fourth state where we call out software as a service as not taxable,” said McDonald, whose company offers software as a service and helps companies connect products to the internet. “This would be a huge economic development advantage to our state. It would make us distinctly different.”

McDonald said he talked to Indiana Department of Revenue officials about the issue and used TurboTax as an example to explain the situation. Customers who buy TurboTax software at Best Buy or download the software from a website onto their computer pay the state’s sales tax, as they do on the purchase of other products.

But customers can also pay to use TurboTax online—without downloading the software to a computer. It’s that situation in which taxation isn’t clear. McDonald—and others—argue using TurboTax online is a service, just as if customers had gone to H&R Block and had someone prepare their tax filing in person. Customers aren’t charged a tax to use H&R Block but the online TurboTax situation is far less defined and the Holcomb administration said it needs state law to clarify it.

Many nearby states—including Illinois, Michigan and Kentucky—don’t charge sales tax on software as a service, but only because of the interpretation of existing tax code or silence in the law.

“Indiana cannot stick out like a sore thumb among its neighbors,” McDonald said. “Because unlike traditional businesses that are difficult to move ... our businesses are in the cloud. So they can move fairly effortlessly to another state if there’s an unfavorable tax situation.”

Lawmakers are scheduled to meet through mid-March.


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