TaxByte: Indiana DOR Ruling Indicates Bundled SaaS not Subject to Sales Tax
The Indiana Department of Revenue found that a company’s provision of web-based fleet management services, as well as the company’s free mobile application (mobile app), were not subject to Indiana sales and use tax.
The company used a “Software as a Service” (SaaS) model, in which its proprietary motor vehicle fleet management software was hosted only on its servers and accessed via the internet by customers. Customers could not install, download, or transfer the company’s proprietary software to their own machines, and they had no control over the software delivery infrastructure. Customers could also download a free company-developed mobile app to their personal devices, which they could use to upload vehicle information but not for fleet management data reporting or analysis. The company’s services, remotely accessed software and free mobile app were all exempt from sales tax on their own, therefore grouping them into one transaction did not render them taxable.
Similarly, because the mobile app was provided for free and was not included in the transaction for fleet management services, it had no effect on the taxability of those services. As a result, the company’s SaaS-based fleet management services were not subject to Indiana sales and use tax, and any tangible personal property delivered for free was also exempt from sales tax. (ST 2020-14, Indiana Revenue Ruling, 07/22/2021.)
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