An Indiana tech leader believes Governor Eric Holcomb is "on the right track" in backing a measure to clarify Indiana’s policy on taxing Software as a Service companies. Legislation making its way through the Statehouse would exempt cloud- or subscription-based software from Indiana’s 7 percent sales tax. DemandJump Chief Executive Officer Christopher Day says, while Indiana SaaS companies traditionally don’t charge sales tax, the legislation would provide clarity and help attract more tech growth.
It’s estimated not charging sales tax on SaaS products costs the state about $10 million per year in revenue, which Day calls "a drop in the bucket" compared to the benefit it has for the tech community.
"We spend an incredible amount of money trying to get attorneys and accountants to give us an opinion or a ruling on if we should be charging tax or not," says Day, "and that costs costs companies like us tens of thousands of dollars to try to figure out."
Supporters say the move would make Indiana’s tech sector more competitive in the national marketplace. If it becomes law, Indiana would be the fourth state in the country to explicitly exempt SaaS from taxation, joining Colorado, Idaho and Vermont. Day says it will also "create wealth" in Indiana, as tech companies tend to pay well over the state’s average wage.
In addition to Governor Holcomb, the bill is backed by Indiana Office of Management and Budget Director Micah Vincent and is a priority measure for the Indiana Chamber of Commerce. The Indiana House is expected to take up the bill, HB 1316, on a third reading later this afternoon. There is an Indiana Senate version of the bill as well. Day says he could see a potential change in the measure that would allow for taxation on products that are available in physical and cloud-based version.