Software tax-exemption bill awaits governor’s signature

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A bill that exempts “software as a service” from Indiana’s 7 percent sales tax is headed to the governor for his signature.

The Senate voted 49-0 in favor of the final bill, Senate Enrolled Act 257, on Tuesday.

“Tech is a growing sector that is transforming every industry,” Gov. Eric Holcomb said in written comments. “This bill will help make Indiana a leader in supporting the tech community by exempting all software as a service from Indiana’s sales tax. It’s a simple move that will make a big difference, and I look forward to signing this legislation.”

The state said Indiana will become just the fourth state to pass such a statute.

Software as a service, or SaaS, is a cloud- or subscription-based software-distribution model in which providers host applications and make them available to customers over the internet.

Global revenue in the SaaS industry topped $43 billion in the first half of 2017. That was up 23 percent from a year ago and made up nearly 70 percent of the overall cloud market, according to International Data Corp.

The bill, which was part of Holcomb’s legislative agenda, went through several changes as it wound through the legislature, but eventually returned to a version that was close to its original form.

It specifies that a transaction “in which an 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” will be tax-exempt.

Tech and business advocates have been solidly behind the latest version of the bill.

The Department of State Revenue, in a fiscal note prepared Feb. 27, estimated the legislation would lower tax state collections by the amount of $5.7 million to $13.4 million in fiscal year 2019 when compared with current law. That estimate does not consider the impact of new business that might be generated by the legislation.

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