NOTICE: Under IC 4-22-7-7, this document is required to be published in the Indiana Register and is effective on its date of publication. It shall remain in effect until the date it is superseded or deleted by the publication of a new document in the Indiana Register. The publication of this document will provide the general public with information about the department's official position concerning a specific issue.

Sales and Use Tax - Web-based platform

Authority: IC 6-2.5-1-1; IC 6-2.5-1-11.5; IC 6-2.5-1-24; IC 6-2.5-1-27; IC 6-2.5-2-1; IC 6-2.5-2-2; IC 6-2.5-4-1; IC 6-2.5-4-15; IC 6-2.5-4-16.7; 45 IAC 2.2-4-2; Sales Tax Information Bulletin #8 (December 2019).

A taxpayer ("Company") is seeking an opinion as to whether its provision of web-based fleet management services are subject to Indiana sales and use tax.

Company web-based fleet management service for handling the administration, management, and record-keeping of motor vehicle fleets. Company provides the following information pertaining to its request, reproduced exactly as submitted in its request for a ruling with certain details redacted:

Based on the foregoing facts, Company requests a ruling as to whether it should assess sales tax on the web-based fleet services described above. Pursuant to IC 6-2.5-2-1(a) and IC 6-2.5-2-2(a), sales tax is imposed on retail transactions made in Indiana. A retail transaction is defined in IC 6-2.5-4-1(b) as the transfer, in the ordinary course of business, of tangible personal property for consideration. IC 6-2.5-4-1(c) goes on to provide in pertinent part:

Company's provision of fleet management services involves both a service component and tangible personal property. "Tangible personal property" is defined in IC 6-2.5-1-27 as:

(Emphasis added).

"Prewritten computer software" is defined in IC 6-2.5-1-24 as follows:

Except for certain enumerated services, sales of services generally are not retail transactions and are not subject to sales or use tax. 45 IAC 2.2-4-2. When services are sold with tangible personal property, IC 6-2.5-4-15 provides that selling tangible personal property as part of a bundled transaction is a taxable retail transaction. IC 6-2.5-1-11.5 defines a "bundled transaction" as "a retail sale of two (2) or more products, except real property and services to real property, that are: (1) distinct; (2) identifiable; and (3) sold for one (1) nonitemized price." However, if none of the products within a transaction meeting this definition are subject to sales tax (e.g., the tangible personal property falls under a specified statutory exemption), then the transaction would not be a taxable bundled transaction.

By using a SaaS model, Company's prewritten computer software resides exclusively on its servers and is accessed by customers through the Internet. Company's customers cannot install, download, or transfer the proprietary software to their own computers. Company owns, operates, and maintains the software used to provide its fleet management services. Company's customers have no control over the network, servers, operating systems, storage, or software capabilities. As an individual transaction, Company's prewritten computer software would therefore not be subject to sales tax pursuant to IC 6-2.5-4-16.7(b).

Company's customers may also download a mobile application to their personal devices free of charge, which may be used to upload vehicle information to Company's fleet management system. The Department has stated in Sales Tax Information Bulletin #8 (Dec. 2019) that prewritten computer software delivered electronically includes "mobile apps;" however, the Department has also advised in the bulletin that "as many mobile apps are offered for free, those mobile apps where there is no charge for downloading the apps are not retail transactions and no sales tax would be collected from the customer." Because Company offers the mobile application to its customers free of charge, it therefore would not be subject to sales and use tax.

Individually, company's service component, remotely accessed software, and free mobile application would not be subject to sales tax. Although the service component and remotely accessed software are included in the same transaction, none of the items individually would be subject to sales tax, and therefore it would not constitute a taxable bundled transaction. In addition, Company's mobile application is provided to customers free of charge would also not be considered a taxable retail transaction pursuant to Sales Tax Information Bulletin #8. Further, it is not part of the transaction for fleet management services, so it does not impact the taxability of the fleet management services. Therefore, Company's provision of fleet management services via a SaaS model are not subject to Indiana sales and use tax, and any tangible personal property provided for free would not be subject to sales tax either.

Based on the information provided, Company's provision of fleet management services is not subject to Indiana sales and use tax. Further, Company's mobile application offered for free to its customer is not subject to Indiana sales and use tax either.

This ruling is issued to the taxpayer requesting it on the assumption that the taxpayer's facts and circumstances as stated herein are correct. If the facts and circumstances given are not correct, or if they change, then the taxpayer requesting this ruling may not rely on it. However, other taxpayers with substantially identical factual situations may rely on this ruling for informational purposes in preparing returns and making tax decisions. If a taxpayer relies on this ruling and the Department discovers, upon examination, that the fact situation of the taxpayer is different in any material respect from the facts and circumstances given in this ruling, then the ruling will not afford the taxpayer any protection. It should be noted that subsequent to the publication of this ruling a change in statute, regulation, or case law could void the ruling. If this occurs, the ruling will not afford the taxpayer any protection.