SaaS Bill Even Better After Amendments

Senate Bill 257 (Sales Tax on Software) took a very positive turn this week when it was amended by the House Ways and Means Committee. After hearing considerable testimony from members of the Chamber’s Technology and Innovation Policy Committee in a hearing last week, it appears the message was received! That message: It would be beneficial to the software industry to provide simple clarity regarding the exempt status of software as a service (SaaS).

The Ways and Means Committee amendment deleted a good amount of language that we were concerned could raise new questions and run counter to the objective of reducing uncertainty about software transactions.

These changes make clear that it is only in the case where prewritten software is delivered electronically (downloaded) that the transaction is considered a retail sale subject to sales tax. And when someone buys the right to remotely access software, the transaction is not taxed. Through these positive amendments, the bill now more directly serves the objective of clarifying that SaaS transactions – those involving the use of software to essentially provide a service – are excluded from taxation.

The Indiana Chamber has been making the case for the need to eliminate the previously existing ambiguous language and convincing legislators that a clear, simple, straightforward piece of legislation can reap very real economic benefits. Our efforts are reflected in this much streamlined version of SB 257. We thank the Ways and Means Committee for listening to our members and taking this important step forward to demonstrate the Legislature’s commitment to embracing the growth of the SaaS industry in Indiana. The revised bill puts Indiana in a very favorable position to attract more and more of this burgeoning industry to our state.

Tech Talk: Staking Their Claim to Be Among the ‘Best’

Technology organizations have traditionally fared well in the annual Best Places to Work (BPTW) in Indiana program, including taking top honors several times in its 12-year history.

In recent years, the number of technology companies making the list has significantly increased. Two reasons, both fairly obvious: Tech is continually becoming a bigger part of our state’s economy and more businesses in this sector are entering the program to gain the valuable feedback that all participants receive.

The 2018 BPTW list was unveiled earlier this week. Twenty-six of the 125 honorees self-identified as being in the tech industry; a few others chose consulting or related fields, but do most of their work in the tech/innovation areas.

Two of the BPTW Hall of Fame organizations (making the list at least eight years of the now 13 years of the program) are Salesforce (ExactTarget in the early days) and Software Engineering Professionals.

But, as noted earlier, the last few years have seen the addition of so many tech start-ups or national companies establishing a strong Indiana presence. The Indiana Chamber’s BizVoice® magazine featured four BPTW newcomers in 2017. Among the first-time winners in 2018: Brite Systems, Carbonite, ClearObject, Clinical Architecture, ESCO Communications, Greenlight Guru, Kronos, OrthoPediatrics, Perficient, Sigstr and Springbuk.

Here’s the 2018 list, in alphabetical order, for the four employer size categories. The celebration, and release of the final rankings, takes place on May 3 at the Indiana Convention Center. BizVoice will have the details about the outstanding workplace cultures at all the winners in its May-June issue.

Congratulations to all the winners. Learn more about the program and prepare to enter for 2019.

Tech Talk: Making Progress at the Statehouse

An Indiana General Assembly analysis at the midway point of the session is always a bit tricky. We can tell you the current status of legislation, but with the caution that more negotiations, compromises and refinements are on the way.

Clarifying the tax status of software as a service (SaaS) is among the high-priority items. Bill Waltz, our tax policy expert, shares this insightful update:

Bill Waltz

As is often the case, the House and the Senate each have their own ideas on how best to address big issues. That is the current circumstance regarding the taxability of software utilized as the means of providing a service. Obtaining greater clarity on this subject is a priority of the Chamber and the Governor.

Senate Bill 257 embodies the efforts of the administration to clarify tax law in this arena. It was largely formulated by the Department of Revenue (DOR) and the Office of Management and Budget to serve as guidance for what is taxable and what is not. The bill is basically a codification of recent DOR rulings interpreting and applying its own information bulletin, which outlines a complicated set of factors and tests. The legislation is focused on what constitutes a retail transaction (sale) of a tangible good.

Essentially, the position of DOR is to tax the sale of prewritten off-the-shelf type software, including such software even if it is downloaded or accessed over the internet. But if it is customized software or software utilized in connection with what is primarily a service to a customer, it is omitted from the new statute and deemed not taxable.

The determinations in gray areas will remain fact sensitive, but the language is intended to make it clearer that software services are not taxable. The statutory provisions should operate to make people in the SaaS industry more comfortable in concluding that they do not need to collect sales tax, unless they are engaged in a transaction that falls squarely into the retail product sale category as set out in the legislation.

On the other hand, HB 1316 takes a different approach. It uses similar language as is in SB 257 but adds several unique twists to the picture. First, it creates a new lesser rate for prewritten off-the-shelf type of software – with the apparent objective of identifying and monitoring the tax revenues associated with these transactions. It excludes transactions where the software is acquired by a business to perform its core business purpose. This business-to-business exemption component is of course a very positive thing and should be embraced. Finally, it looks to the long term potential of sales involving software as the industry continues to expand, plus creates a trigger reducing the standard sales tax rate for when total collections exceed $250 million (a threshold so high that it is hardly foreseeable in the near future.)

Perhaps it makes the most sense to combine the good pieces of these competing bills to produce the best end result. The Chamber sees much merit in doing all that is possible to clarify the state of the law regarding SaaS as is addressed in the Senate bill. This is needed and would be a positive step. But while unique aspects of the House bill present some real concerns, it also includes the most solid of tax principles – don’t tax business inputs. Exempting business-to-business transactions would prove a terrific encouragement to the SaaS industry to conduct their businesses in Indiana.

In the second half of the session, the Chamber will be leading the charge to resolve the SaaS clarification issue to the fullest extent possible.

A variety of other tech policy priorities are still in play. Here is a brief summary.

Tech Talk: Planning Ahead for Big Events

There is no shortage of tech-related conferences and events throughout Indiana. To help you plan ahead, here is an update on three important ones upcoming this spring:

Although work is already taking place at the Indiana IoT Lab in Fishers, the official grand opening will be March 21. More than 50 companies are on board at the facility, where innovation and collaboration will meet to advance the connections between Indiana businesses and Internet of Things technology.

The AT&T IoT Civic Hackathon will return April 20-21 at the Indiana IoT Lab and Launch Fishers. The focus of the third annual Hackathon will be improving first responder technology and public safety. Among the many guest speakers: former Boston Police Department commissioner Ed Davis and Indiana congresswoman Susan Brooks.

The Indiana Chamber’s inaugural Cyber Security Conference is set for May 1 at the Indiana Chamber Conference Center. Protecting company information from ever-increasing sophisticated attacks is vital for all organizations. Best practices in cyber security and data privacy will be featured. Registration is open and sponsorship opportunities remain.

Save the Date

Tech Talk: Catching Up on Some Conversations

Podcast

Two of the focus areas of the Indiana Chamber’s EchoChamber podcast are education and technology. Both take center stage in the early months of 2018.

Two conversations – with Marian University President Dan Elsener and WGU Indiana Chancellor Allison Barber – are available now. Three more to come feature Trine University President Earl Brooks (January 30), Salesforce Marketing Cloud CEO Bob Stutz (date to be scheduled) and South Bend’s Rich Carlton, president and COO of Data Realty (February 27).

Innovation is one of the themes that carries throughout these discussions. Elsener was greeted with a great deal of skepticism when he announced plans to start a medical school at the private Indianapolis university. Its first graduates came in 2017. That is among a variety of initiatives that has Marian well on the way to doubling in size by 2025.

WGU Indiana brought a new online, competency-based approach when it became the state’s eighth public university in 2010. It offers an avenue for working students (80% are employed full time) to advance their skills and earn bachelor’s or master’s degrees. Trine has expanded its academic and athletic offerings, with significant growth both geographically and in enrollment.

Stutz has touted Indiana’s tech environment since his arrival in 2016. Carlton is passionate about data management and community development. We know you will enjoy their insights and getting to know them a little better.

You can listen to all EchoChamber conversations online. Subscribe at iTunes, GooglePlay or wherever you get your podcasts to be notified about the latest episode. Also, please rate and review us on Apple Podcasts.

Freelancing Frenzy to Continue

(Originally published in smallbiztrends.com)

In the coming decade, the majority of workers in the U.S. are expected to be freelancers, according to a report from Edelman Intelligence.

The study surveyed 6,000 U.S. workers to determine changing working patterns and the impact freelancing will have on the future of working and employment practices in the U.S. This trend is being driven by the millennial generation, of which 47% currently freelance.

Technology is playing a huge role in changing workplace practices and ushering in the rise of freelancing, says Amy Sept, managing editor of the Upwork blog. According to the survey, 71% of freelancers said the work they acquired online has increased during the past year.

Despite income predictability being perceived as a barrier to freelancing, the report found 63% of freelancers believe working for a range of different clients, and therefore generating multiple income streams, is more secure than relying on one employer. Freelancers, on average, have 4.5 clients every month.

Savvy freelancers are also looking to the future, keen to learn new skills. The report found that 55% of freelancers took part in skills-related training, compared to just 30% of non-freelancers.

Tech Talk: Seeking Further Legislative Progress

 

Legislators returned to the Statehouse one week ago for the “short” session of the Indiana General Assembly. That means adjournment must occur no later than March 14 and there is no budget to construct as the current two-year plan was put into place in 2017.

Technology and innovation issues, however, will be on the table. This follows some early successes in 2017 (see Page 5 of the comprehensive 2017 Final Legislative Report) that included establishment of the Next Level Fund, resources for the Management and Performance Hub, enhanced broadband connectivity and more.

The Indiana Technology and Innovation Council Policy Committee, led by John McDonald of ClearObject and Bill Soards of AT&T Indiana, worked through the remainder of 2017 to craft new and revised policy positions moving forward. They were the focus of much of the discussion at the second Tech Policy Summit in early December and in meetings with legislative and executive branch leaders.

We enter the new session cautiously optimistic of continued progress. Among the key topics: clarity of tax treatment of software-as-a-service (SaaS), computer science education requirements for students and development of an autonomous vehicles policy.

Browse the following to become more informed of both key tech/innovation priorities and the Indiana Chamber’s broader focus:

Tech and Innovation Legislative Business Issues

Tech, Innovation and Indiana’s Future Economy (two-page overview of why these policy priorities are so important)

2018 Indiana Chamber Top Legislative Priorities

Indiana Chamber Top Policy Victories

Additionally, TechPoint is accepting applications for the 19th annual Mira Awards honoring ‘the best of tech in Indiana.’ The Mira Awards are like Indiana’s Oscars for technology with award categories recognizing the people, products and companies that make our community so special.

Applications are due January 19. Visit https://techpoint.org/mira/ to apply. This year’s black-tie gala celebration will be held Saturday, April 28, at the JW Marriott – Indianapolis.

You can learn more about this year’s upcoming Mira Awards from the official awards program launch press release.

Indiana INTERNnet: Video Interview Tips

Video interview

Editor’s note: This post originally appeared on the Indiana INTERNnet blog.

Step aside in-person interviews, video interviews are becoming increasingly popular in today’s workforce. This technologically-advanced method is a time and cost saver for interviewers and interviewees. You should treat it as a traditional in-person interview, but with a few variations for before and during the meeting.

Tech Test
In preparation, you should test the technology you’re going to use for the interview far in advance (at least a few hours before). The interviewer will send instructions for joining the meeting, this may include a phone number in place of using computer audio. There are many different options for video conferences, so familiarize yourself with the correct one and download the necessary software installation or updates. If you choose to use your computer’s audio or a headset, be sure to test the microphone and speakers.

Image is Everything
In addition to testing your computer’s microphone and speakers, you should check the functionality of the camera. If using a laptop, you may need to prop it up so the camera is more level with your face. Try setting a few books underneath the laptop to reach the appropriate height. Be sure to dress professionally (this is still an interview). They may only see from your shoulders and up, but your outfit could affect your attitude. Pajamas, while comfy, may make you sound too casual and unprofessional.

You should also be mindful of your surroundings. Find a quiet place without potential interruptions. A child or cat running into the room could be a big distraction.

Eye of the Interviewer
This is one of the most important and (somewhat) difficult pieces of the video interview. While the camera is usually located at the top of the laptop, the interviewer will be shown on the screen below forcing your eyes downward. It’s an unnatural feeling to focus your eyes on the camera instead of the person you’re talking to. You can try practicing with friends/family before the interview, or place arrows on either side of the camera as a reminder.

Note with Caution
Another benefit of video interviews is note taking without the interview seeing what you’re writing. Be sure to use caution, as you don’t want to appear too distracted. Come up with a few questions you want to ask about the position or company, and write it down. This way you won’t panic when it’s your time to ask questions.

(Still) Under Pressure
While you may feel more comfortable interviewing in your own environment, you should still do the normal prep work as you would for a traditional interview; research the company and its products/services, practice answers for typical interview questions, review the position description, etc.

Struggling to come up with your weaknesses is just as awkward in a video interview as it is in person.

Tech Talk: Life After Unicorns

Editor’s note: Author Christian Beck is principal design partner at Innovatemap. This is excerpted from a more extensive post on “5 Trends Transforming the World of Venture Capital.” 

As a designer with no formal business training, I could be the last person qualified to write about the world of venture capital (VC). However, over the last several years of working with dozens of start-ups seeking seed funding and scale-ups pitching for Series A, I’ve taken it upon myself to learn the language.

To learn more about investing, I highly recommend Neil Murray’s newsletter, Series F. But for those start-ups trying to get a handle on macro-level trends in the world of VC, I am going to share how I see it from an outsider’s perspective.

One helpful piece of context is that my VC education is driven largely by witnessing first-hand how these firms work in the Midwest, contrasting with what I read from the SF-area firms. As with most things tech, Silicon Valley is the most mature market and often provides a glimpse of the future for other emerging markets. It’s also true that emerging markets can learn from the missteps of those pioneers and chart different paths.

I’ve been following a few trends in venture capital that I think are exciting and possibly transformative. One of those is zebras.

“Zebra” is a term created to contrast the unicorn, which has typically referred to companies valued at $1 billion or more. Zebras represent companies that are profitable, sustainable, and beneficial to society. As I’ve been digging into this trend, I can see the need to insert a new metaphor in the start-up world.

zebra

Unicorns are being chased at all costs, and it’s had a negative effect on entrepreneurs. What may start as an idealistic passion to change the world can easily get bastardized into chasing user acquisition, monthly recurring revenue (MRR) and hockey stick growth … at any cost.

At the heart of this is the notion that VC firms are chasing 10x returns. I’m no financial analyst, but that seems a bit like overkill. You might want to be Lebron, but if you could settle with playing in the NBA, you’d probably be just as happy.

And that’s what is really behind the Zebra trend: a reality check that every start-up doesn’t need to be a unicorn. Indie.vc proves this with a long list of companies they fund and other companies that have scaled based on revenue rather than funding (also note how simple their own web site is: the zebra mentality is carried through top to bottom).

It’s not that becoming a unicorn is inherently bad, but the mentality to get there can create a series of bad decisions that lead to failed products like the Juicero – a SaaS-based juice start-up – when simply making a better juicer would’ve been sufficient.

What it means for the Midwest

The Zebra trend is particularly relatable to Midwest tech hubs that are trying to evolve older industries like agriculture and manufacturing. Creating unicorns is less attractive than creating strong companies with the goal of establishing a healthy local economy. Pumping start-ups with cash in hopes of a 10x return may be fun in the short-term, but it doesn’t provide long-term stability and healthy growth.

Ultimately, tech products should solve problems, but businesses should help local economies. Nowhere is this more pronounced than the Rust Belt. Here, it’s less important to roll the dice on unicorns and more important to establish strong companies that strengthen local economies. As the Rust Belt continues to emerge as a key player in the tech industry, this trend will become the norm.

Takeaways for start-ups

Focus on jobs over profits: Maybe it’s just the Heartland in me, but I tend to believe that while tech companies can service customers around the world, they can still have a local impact. The Fortune 500 is full of companies that grew slowly, created long-term value for investors and provided amazing places to work. Tech doesn’t need to be different. SaaS products can still grow by focusing on employees as much as they do their profits.

Set realistic revenue targets: The path to healthy growth starts with realistic targets. Given enough time and creativity, every start-up can plot a path to unicorn-land and often VC’s may feel the same way. But setting realistic expectations early on will lead to better product decisions down the road. Ultimately, you may find that early on you might have more revenue-based growth opportunity than you realize and wait to take on more investment (if at all).

Tech Talk: Moving Ahead on the Policy Front

2017 Tech Policy Summit

The discussions at the second Indiana Technology & Innovation Policy Summit last Friday were so plentiful and rich with content that three stages were utilized during the five-hour event. Seven sessions and a keynote address were part of the mix.

We’ll hit a few highlights below, but an overall takeaway: Our state has momentum, there is more work to do to continue that positive pace and one way for tech and innovation business leaders to get involved and help ensure success is communicating with your legislators. It’s a critical component.

In the words of the presenters:

  • Fishers Mayor Scott Fadness: Indiana can largely check the box on enhancing its tax and business climate; today is about the innovation climate and building bridges between traditional industries and technology companies. And he says the IoT lab coming to Fishers will send a powerful message about aggregating talent.
  • Software-as-a-Service: The legislative mission is to provide “certainty and predictability to the tech community” about SaaS and tax treatment. Three states (Washington, Tennessee and Pennsylvania) have put up red lights on software development by taxing SaaS. Indiana seeks to join a similar number with a green light encouraging investment. Christopher Day of DemandJump: “It’s not just about SaaS. What it’s about is growing our wealth as a state. It’s time to transition the Crossroads of America to the Nation’s Nucleus.” SaaS panel
  • Certified Technology Parks: Fifteen of 23 tech parks in the state have met the $5 million funding cap. The proposal is to allow those parks that meet certification requirements to be eligible for additional funds to continue to provide technical assistance to companies within the facilities.
  • Larry Gigerich, Ginovus, on expanding investment capital: Twenty states have tax credits that are transferable, sellable or bondable with eight or nine more set to consider such action. Indiana is missing from that equation, its 20% tax credit is no longer competitive against many other states and the state’s cap is “middle of the pack.” Although the Next Level Fund approved in 2017 will be helpful, Gigerich gives preference to a stronger tax credit system.
  • Autonomous vehicles (AV): State Rep. Ed Soliday presented extensive data. Again, Indiana is looking to join other states (21 with legislation, five with executive orders) with some form of policy. Indiana’s goals: ensure public safety and encourage innovation/AV research and development in our state. Soliday says much work needs to be done to convince the public about the benefits.
  • Data centers: Rich Carlton of Data Realty didn’t argue with the general assertion that data centers themselves don’t create large numbers of jobs, but cited the related development and job creation that has taken place in South Bend. Tax treatment is preventing Indiana from being a participant in the national data center boom. A $2 million data center building with an additional $23 million in equipment would be taxed at the first figure in many states, but at $25 million in Indiana. Carlton: “Do we want to have part of something or all of nothing?”

Jeff Brantley, Indiana Chamber vice president of political affairs, connected the dots on legislative victories resulting from both political and policy involvement from the business community.

Micah Vincent, director of the Indiana Office of Management and Budget, shared that we can expect to see the initial Next Level Fund investments in the first quarter of 2018. And he projected that the 2018 Indiana General Assembly may very well end up being the “workforce session.”

Check out the two-page summary of how the legislative positions of the Chamber’s Tech Policy Committee can impact the state’s economic future. Look for continued coverage of these important issues through various Chamber communications.