Ways and Means Passes a Novel Software-as-a-Service Bill

Bill # and Title: HB 1316 – Sales Tax on Software
Author: Rep. Tim Brown (R-Crawfordsville)
Summary: Provides that for purposes of the sales tax, a person is a retail merchant making a retail transaction when the person grants the end user the right to: (1) use prewritten computer software delivered electronically; or (2) remotely access prewritten computer software over the internet, over private or public networks, or through wireless media. Provides, however, that a transaction in which a person grants the end user the right to remotely access prewritten computer software over the internet, over private or public networks or through wireless media is not a retail transaction if the end user is a business that uses the prewritten computer software to carry out core functions of the end user’s business. Specifies that in the case of taxable transactions in which a person grants the end user the right to remotely access prewritten computer software over the internet, over private or public networks or through wireless media, the transaction is subject to a sales and use tax rate of 3%.
Chamber Position: Support in Part
Status: Was amended and passed out of the House Ways and Means Committee.

Update/Chamber Action: The House measure addressing the software-as-a-service (SaaS) issue is novel bill. It is uniquely structured to tax remotely accessed, prewritten software at a separate rate of 3%, as opposed to the 7% tax applicable to typical retail sales of tangible goods. This bifurcated system would violate the streamlined sales tax agreement that Indiana currently participates in. An amendment to the bill provides for the Department of Revenue to track the collections under this 3% scheme. And if the annual revenues reach $250 million, the standard 7% rate will be reduced to 6.75%. This unique setup appears primarily to serve as a means for accounting for the volume of transactions taking place via the internet. It is highly unlikely that these transactions will generate such a total in the near future, or ever, unless some other tax provisions change to match a new internet-of-things economy.

Chamber representatives testified in support of the bill, based on the fact that it recognizes the need to address the lack of clarity existing in regard to the taxation of SaaS in Indiana. While we indicated serious concern with a number of its provisions, it nonetheless is an attempt to fix a problem that needs fixed. It promotes the furtherance of the discussion to pass some form of legislation. In other words, we commended the bill’s objective and offered a conceptual support of the effort. The bill does have one particularly positive feature in that it excludes the application of the 3% tax when the software is acquired by a business as a business input. This bill will almost certainly be put on the negotiating table at the end of the session, alongside the Senate SaaS legislation (SB 257). Although quite different in approach, they both deal with the same subject and appear to have the same objective. The Chamber will remain closely engaged in the many discussions that will play into their ultimate reconciliation.

Resources: Bill Waltz at (317) 264-6887 or e-mail: bwaltz@indianachamber.com; R. Mark Lawrance at (317) 264-7547 or email: mlawrance@indianachamber.com

Autonomous Vehicle Bill Passed House With Bipartisan Support

Bill # and Title: HB 1341 – Autonomous Vehicles
Author: Rep. Ed Soliday (R-Valparaiso)
Summary: Preempts local government from enacting laws that prohibits the authorized use of an automated vehicle. Allows a person with a driver’s license to operate an automated vehicle on a public highway. Requires automated vehicles to comply with all applicable federal and state laws pertaining to the type of motor vehicle being operated. Prohibits the use of an automated driving system or an automated vehicle that does not comply with federal and state laws concerning the functions operated by the automated driving system or the type of motor vehicle being operated. Requires all automated vehicles to be registered with the Bureau of Motor Vehicles and any person who operates an automated vehicle to maintain proof of financial responsibility with the bureau. Requires a person who operates, platoons or tests an automated vehicle to have at least $5 million worth of financial responsibility per entity. …
Chamber Position: Support
Status: Passed by the House 92-0; now goes to the Senate for consideration.

Update/Chamber Action: This is a top technology policy priority for the Chamber. First and foremost, this bill allows autonomous vehicles (AV) to be tested on Indiana roads. Some of Indiana’s auto manufacturers do not like the test certification process outlined in the bill. However, legislators feel they need that provision to show the public this bill has safety at the forefront. This bill works to strike a balance between innovation of this evolving technology and public safety, absent of federal regulations from the National Highway Traffic Safety Administration.

The bill also addresses truck platooning. This technology uses GPS and WiFi to allow one truck to closely follow another for increased fuel efficiency.

The Chamber testified in support of this bill in committee and will work to encourage the Senate to take up this measure in committee and ultimately pass it.

Resource: R. Mark Lawrance at (317) 264-7547 or email: mlawrance@indianachamber.com