A professional association was not liable for Indiana sales tax on fees paid to display its real estate listings in an online database. The vendor that sold use of the database provided the association with a service in exchange for the fees, not property. Indiana does not impose tax on the type of service provided by the vendor.
Sale of a Service vs. Property
Sales of prewritten software are subject to tax. However, sales of access to software on a vendor’s servers are not taxable when:
- the vendor does not transfer the software to the customer;
- the customer does not own the software; and
- the customer does not control the software.
Further, a vendor’s sales of data reports compiled with a computer are not taxable when the customer furnishes the data.
Here, the association pays the vendor to put its members’ real estate listings into a standard format. The vendor receives the listings data from the association’s members, and enters it into an online database. Then, members search the database for listings over the Internet or through a mobile application.
In the transaction, the association bought a database service. Also, the association gave its own data to the vendor and received access to a “report” of its data in a standardized format. As a result, the transaction was not subject to tax.
Memorandum of Decision No. 04-20170483R, Indiana Department of Revenue, November 29, 2017, ¶402-792
In another ruling, Indiana has addressed cloud-based services that are also telecommunications services.