Effective July 1, 2018, Indiana has enacted an exemption for cloud software transactions. Per the legislation, 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 is not considered to be a transaction in which prewritten computer software is delivered electronically and does not constitute a retail transaction. The exemption applies only to transactions occurring after June 30, 2018. The legislation is scheduled to expire on July 1, 2024.
This legislative intent was to clarify the taxation of SaaS but it is a change in position. Currently, charges for accessing prewritten computer software maintained on the vendor’s or a third party’s computer or servers are not subject to tax when accessed electronically via the Internet if the customer is not transferred the software, does not have an ownership interest in the software, and does not control or possess the software or the server. Otherwise, the charges for remotely accessed software are taxable today. This legislation will provide clarity and consistency regardless of whether an applet is downloaded to facilitate usage of the remotely accessed software. (S.B. 257, Laws 2018)