Holcomb signs bill exempting ‘software as a service’ from state sales tax to attract more tech firms

Bill signing ceremony on March 23, 2018

INDIANAPOLIS, Ind. – Gov. Eric Holcomb signed a bill into law Friday that makes Indiana one of four states to exempt sales of “software as a service” from state sales tax.

Holcomb and the Indiana Chamber of Commerce said the law is an important step in encouraging the growth of technology companies in Indianapolis. The governor signed Senate Enrolled Act 257 at DemandJump—an Indianapolis-based software company.

The bill exempts remotely accessed, electronically delivered, prewritten computer software — also known as “software as a service” — from the state’s 7-percent sales tax.

Bill Waltz, vice president of taxation and public finance for the Indiana Chamber of Commerce, said the policy is important for tech companies and those who do business with them. The chamber made the bill one of its top priorities.

“The new law is straightforward on what transactions are exempt. Having clarity around that will help grow Indiana’s software development economy, as well as prevent onerous taxation of other necessary business expenses throughout the business community,” Waltz said.

Holcomb called the law “critical” to Indiana’s ability to continue to recruit tech companies. He admitted he didn’t know much about the topic a year ago.

“This was an issue I didn’t know much about a year ago, but as I traveled the state, it came up again and again when I met with tech leaders,” Holcomb said. “To me, this is a prime example of how quick and responsive our state can be to meet the needs of our partners.”

The exemption will cost the state millions in revenue, but Holcomb and other state leaders hope attracting more tech companies will offset that.