SB 320 – Withholding Tax Remittance
Authored by Sen. Linda Rogers (R-Granger)

Provides that the state Department of State Revenue shall only accept payment of employer withholding taxes that are made or withdrawn directly from the business account of the employer that is liable for withholding and remitting the tax. Prohibits the department from accepting payment of employer withholding taxes that are made or withdrawn from the account of a third party withholding agent, or otherwise remitted by a third party withholding agent, on behalf of an employer. Defines “third party withholding agent” to include a payroll service provider, an accounting firm or tax preparer, and a reporting agent that is authorized to prepare and file returns or take other similar reporting and compliance actions on behalf of a business client with regard to that client’s employer withholding taxes. Requires each employer that is required to remit withholding taxes to provide to the department an authorization for reoccurring payment of taxes from the employer’s business account that is designated by the employer on the department’s online INtax system. Requires the department to automatically withdraw from the employer’s business account the amount of tax withholdings that are reported as due and owing on the taxpayer’s Form WH-1 report. Requires the department to provide periodic notice to each employer through INtax of: (1) the date on which the employer’s Form WH-1 report is received by the department; and (2) the date on which the department has automatically withdrawn any amount of tax from the employer’s business account.

Chamber position: Support in part/oppose in part

The latest: Amended and passed by the Senate Tax and Fiscal Policy Committee 9-0.

The bill was amended in committee to allow “large employers” – those with payrolls of around $300,000 to $500,000 annually – the ability to waive the application of the provisions of this bill and continue to maintain their current arrangements with their payroll service provider.

Indiana Chamber action/commentary: The Chamber has been meeting with the author regarding the objective of this bill and expressed our concerns. These were also communicated in testimony before the committee. Our position is that something does need to be done to protect businesses from the misuse of their funds by payroll companies. However, we do not believe that the structure of this bill represents the most desirable remedy and other options for regulating the handling of funds need to be explored. We maintain that this issue deserves a full vetting before an interim study committee.

Employers have come to rely on the services and convenience that payroll companies provide. This bill would substantially disrupt the current arrangements that so many employers enjoy. We appreciate that the author amended the bill to allow larger employers the option to waive the application of the provisions of this bill and continue to maintain their current arrangements but see no reason that same ability not be made available to all employers, regardless of size.

The author has indicated to us that she will seek to further amend the bill when it comes before the full Senate next week, to expand this waiver option to encompass all employers. That step is welcomed; however, it leaves open the question of whether there are alternative steps that need yet to be determined by a study committee

Resource: Bill Waltz at (317) 264-6887 or email: bwaltz@indianachamber.com