In Revenue Ruling #2025-02-RST, the Indiana Department of State Revenue determined that access to a generative AI chatbot—provided via subscription through a website or app—is not subject to Indiana sales tax.
Key Points:
- The AI chatbot is accessed online; no software is downloaded or transferred to the customer.
- Customers use their own internet connection and devices to interact with the chatbot.
- The service is considered Software as a Service (SaaS), which Indiana does not classify as taxable tangible personal property.
- Even API access to the chatbot, which allows integration into other applications, is not taxable as long as no software is delivered.
⚖️ Legal Basis:
The ruling cites Indiana Code sections and prior tax cases that emphasize:
- Tax statutes must be strictly construed against the taxing authority.
- SaaS offerings that don’t involve software delivery are exempt from sales tax under current law.
You can read the full ruling on Indiana’s Official Register
