Ind. Code ch. 6-8.1-18

in effect

Ind. Code § 6-8.1-18-1 "Payroll service provider"

Sec. 1. As used in this chapter, "payroll service provider" means a third party service provider that is authorized to prepare and file returns, withdraw funds and hold the funds in the payroll service provider's bank account, remit payment, and take other similar reporting and compliance actions on behalf of a business client with regard to that client's tax withholding and remittance duties under IC 6-3-4-8. The term includes a reporting agent as described in IRS Rev. Proc. 2012–32, 2012–35 I.R.B 1. The term does not include an entity registered pursuant to IC 27-16-4-1 or IC 27-16-4-6. As added by P.L.97-2021, SEC.2.

Ind. Code § 6-8.1-18-2 "Responsible person"

Sec. 2. As used in this chapter, "responsible person" means an officer or director of a payroll service provider, or an employee or any other person affiliated with a payroll service provider, who is responsible for collecting, accounting for, and paying withholding taxes on behalf of a business client of the payroll service provider. As added by P.L.97-2021, SEC.2.

Ind. Code § 6-8.1-18-3 Annual registration; payroll service provider

Sec. 3. (a) The department shall require each payroll service provider to annually register with the department in the manner prescribed by the department. (b) The department shall prescribe the annual registration form to be used by a registrant under subsection (a). The form must require at least the following: (1) A list of all responsible persons of the payroll service provider that provide third party payroll services. (2) A certification and acknowledgment by the payroll service provider that the bank account that is used by the payroll service provider for employer withholding tax deposits shall only be used for employer withholding tax liabilities and other payroll obligations of client employers that the payroll service provider is holding and is required to remit to the appropriate agency, employee of the employer, or other payee as authorized by the employer, and may not be used for any other purpose (other than using the account as a sweep account under section 4 of this chapter), including for the payment of operating expenses or personal use, and that a payroll service provider's withdrawal or use of funds in the account for any other purpose constitutes fraud. As added by P.L.97-2021, SEC.2.

Ind. Code § 6-8.1-18-4 Payroll service provider; permitted to retain income generated on client funds

Sec. 4. Notwithstanding section 3(b)(2) of this chapter, a payroll service provider shall be permitted to retain any income generated on client funds while held in a payroll service provider's legal possession pending remittance to authorized payees if the client agreement expressly permits it and the payroll service provider: (1) complies with the National Automated Clearing House Association rules; (2) maintains bank and custodial accounts for client funds that are segregated from any operating funds of the payroll service provider; and (3) either: (A) is a publicly held company (subject to Securities and Exchange Commission reporting, public company accounting standards, and audit requirements); (B) is subject to federal or Indiana financial regulatory oversight related to the handling of client funds; (C) is subject to review by partner financial institutions at least annually; or (D) conducts annual SOC 1 or SOC 2 reports of security and integrity controls. As added by P.L.97-2021, SEC.2.

Ind. Code § 6-8.1-18-5 Payroll service provider; required contract provisions; third party payroll services

Sec. 5. A contract entered into by a business client with a payroll service provider for third party payroll services must include a provision that substantially specifies that if the payroll service provider fails to deposit a business client's employer withholding taxes when due, and the failure is caused by an error or omission of the payroll service provider and not by the business client, the payroll service provider shall be required to reimburse the business client for the business client's payment of any penalties or interest assessed by the department as a result of the failure. As added by P.L.97-2021, SEC.2.

Ind. Code § 6-8.1-18-6 Failure to remit taxes

Sec. 6. (a) If a payroll service provider knowingly or intentionally fails to remit taxes withheld pursuant to IC 6-3-4, the payroll service provider is liable and the responsible persons of the payroll service provider shall be personally liable for such taxes that were withheld by the employer and collected by the payroll service provider and not remitted, along with any penalties and interest on such taxes. (b) A responsible person of the payroll service provider who knowingly or intentionally fails to remit taxes withheld by an employer and collected by the payroll service provider pursuant to IC 6-3-4 commits failure to remit taxes, a Class A misdemeanor. However, the offense is a: (1) Level 6 felony if the amount of the unremitted taxes is at least seven hundred fifty dollars ($750) and less than fifty thousand dollars ($50,000); and (2) Level 5 felony if the amount of the unremitted taxes is at least fifty thousand dollars ($50,000). (c) The liability under this section shall not be construed to relieve the liability of the employer, or any person otherwise with a duty to withhold and remit taxes under IC 6-3-4 for taxes that were withheld or should have been withheld pursuant to IC 6-3-4. (d) Any amounts paid to or collected by the department pursuant to this section from a payroll service provider or responsible person of a payroll service provider must be credited to the employer's liability in the same manner as if the employer or person otherwise with a duty to withhold and remit taxes under IC 6-3-4 had remitted that amount. As added by P.L.97-2021, SEC.2.

Ind. Code § 6-8.1-18-7 Annual fee for registration

Sec. 7. The department may charge an annual fee for registration under this chapter. The following apply to any fee charged by the department under this section: (1) The fee must be imposed in a range of amounts based on the number of clients of a payroll service provider. (2) The estimated annual revenue from the fee may not exceed the cost to implement the provisions of this chapter and on ongoing maintenance. Any fees collected under this section shall be deposited into a special account in the state general fund known as the payroll service provider registration fee account. Money in the payroll service provider registration fee account is annually appropriated to the department for its use in carrying out the purposes of this chapter. As added by P.L.97-2021, SEC.2.

Ind. Code § 6-8.1-18-8 Required address of record with the department; employer's address

Sec. 8. The employer's address shall be the address of record with the department for withholding tax purposes. An employer's address of record with the department may be changed only by direct written request from the employer. A payroll service provider may not change an address of record with the department. As added by P.L.97-2021, SEC.2.

Ind. Code § 6-8.1-18-9 Notice to employers; remittance of taxes

Sec. 9. The department shall provide notice to an employer when a payment of taxes pursuant to IC 6-3-4 has been remitted by either the employer or the payroll service provider or any other entity that pays the taxes on behalf of the employer. The department may provide the notice under this section by advising the employer to check the employer's online portal account. As added by P.L.97-2021, SEC.2.

Ind. Code § 6-8.1-18-10 Rules

Sec. 10. The department may adopt rules under IC 4-22-2 for the administration and enforcement of this chapter. As added by P.L.97-2021, SEC.2. Amended by P.L.93-2024, SEC.60.

Source: Open US Law by Vaquill AI (CC BY 4.0)URL: https://iga.in.gov/laws/2026/ic/titles/6Fetched: 10/17/2026